Early on in 2020, most foreign currencies followed similar patterns as they fell against the dollar in March as the Coronavirus panic unfolded and investors flocked to relative safety. However, after the dollar spiked, the trend was reversed, and the dollar began falling against most major currencies as the Fed increased the money supply. The DXY, an index tracking the U.S. dollar, ended the year at 89.93 down from 102.82 at the height of the panic in March. With the new administration and the Fed’s decision to keep interest rates artificially low for the foreseeable future, the outlook for the dollar remains murky and could possibly continue to fall against its peers.
By contrast, the Swiss Franc had a particularly strong year, with a maximum drawdown of only 2.1% from its yearly open. As a result of its robust performance, the Franc started 2021 at a six-year high but has somewhat stabilized since then. The Euro had a similar year, rising sharply against the dollar throughout 2020. And while the British pound also strengthened against the dollar, issues with Brexit weighed down on the currency throughout the year. The Japanese Yen had the biggest drop against the dollar in March out of the four currencies, but it quickly recovered and ended up gaining 5.4% for the year.
January 25, 2021