Experts who spoke to “Sky News Arabia” warned of negative and possibly dangerous repercussions of the current crisis on the value of the dollar, especially since the US government must reach an urgent mechanism to pay its obligations before Monday, June 5.
American economic analyst Deacon Hyatt says that the dollar’s decline or its negative impact may be one of the potential effects of the current crisis in the United States, warning that the government is running out of time to secure its commitments before the set date of June 5.
According to Hayat, the damage resulting from the crisis is related to the US economy as well as the expected repercussions on the movement of the global economy, which is largely linked to the United States.
The American analyst does not expect a decline in the value of the dollar, but potential negative effects related to the decline in its strength against some currencies that represent the strongest competitor within the basket of the six most powerful currencies in the world.
All expectations remain at the present time about the government’s ability to abide by the deadline set by the US Treasury to avoid a historic crisis, if the United States is unable to pay its debts.
worse scenario
The two economists, Kiran Kaushik and Sami Al-Shaar, expect, in a joint analysis, a decline and weakness in the value of the US dollar during the coming period, driven by several factors, including the US debt crisis, as well as political shifts in the global system, and among their most prominent expectations for the dollar during the year 2023 are:
- The belief that the recent strength of the dollar may be short-lived, as US growth slows and hopes for a rate cut in 2023 fade.
- They also expect the US dollar to weaken against the euro, the Japanese yen and the Swiss franc in the latter half of the year, and to maintain the current dollar weight in portfolios.
According to the two experts, the dollar has maintained its strength in 2023 so far, even amid the ongoing turmoil in regional banking services in America, the regional banking sector in America and the political crisis over the US debt ceiling, but the indicators are heading towards global weakness.
Do safe havens save the value of the dollar?
For his part, Tony Sycamore, an analyst at IG Markets, told Sky News Arabia, “The dollar has witnessed a good and strong rise, and there are good reasons for that,” referring in particular to the demand for safe havens amid the confrontation related to the debt ceiling, as well as On growing signs of a slowdown in China and Europe.
After arduous negotiations, the Senate and House of Representatives passed a bill that would raise the government’s debt ceiling of $31.4 trillion to avoid what would have been the first default by June 5.
Under the legislation, the federal borrowing limit is set to be suspended until January 1, 2025.
US Treasury Secretary Janet Yellen praised the passage of the law, saying, “The passage of the debt ceiling bill protects the full credibility and credit of the United States and maintains our fiscal leadership, which is critical to the growth and stability of our economy.” Debt to the United States as a bargaining chip.
The law imposes a limit on some expenditures, with the exception of military expenditures to keep them stable in 2024, and an increase of 1 percent in 2025.
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