Goldman Sachs predicts disastrous scenario for the dollar

The dollar may decline to its lowest level in 2018 in light of the increasing chances of Joe Biden winning the US presidential election, and developments related to the Corona vaccine, according to a Goldman Sachs report.

And the American bank analysts wrote in a note issued on Friday that the most likely scenario now will lead to a weak dollar, and the scenario that supports it has become less likely, which is Donald Trump's victory with the delay in production of the coronavirus vaccine.

They indicated that the rise of the blue wave (Democrats) in the presidential elections, and the good news about the coronavirus vaccine may drop the dollar to its lowest level since 2018.

The ICE U.S. Dollar Index, which measures the average performance of the dollar against six currencies, fell 3% since the start of the year, and is trading just above 93 on Monday, as investors reacted to the unprecedented monetary stimulus from the US Federal Reserve and low interest rates. The index was trading at 89 points in 2018, which is 4% below the current level.

Goldman Sachs joins UBS Asset Management and Invesco, with the dollar expected to decline, especially as Joe Biden is expanding his leadership in the presidential election race that will start in less than 3 weeks. The bank recommends to investors selling the dollar against a basket of currencies consisting of the Mexican peso, the South African rand and the Indian rupee.

The strategy also favors buying the Euro, the Canadian dollar and the Australian dollar against the US dollar. The bank maintained its long-term recommendation on the Chinese yuan via non-hedging Chinese government bonds.