The US dollar index started Monday on the back foot as it turned red as the markets opened. The DXY index currently stands at 102.40 points and has seen a drastic dip from 108 points since December last year. The USD index is on a tailspin coming dangerously closer to the 100 points level. If the markets continue to dip further, the US dollar Index has more chances of slipping below the 100 mark and trading at double digits between the 98-99 range.
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The development is not good for the strength of the US dollar as the Index points towards turbulence. The broader markets could face the brunt of a declining US dollar and the stock market could be impacted. Read here to know why leading institutional investors believe the US markets could crash 20% and are prepared for impact.
US Dollar Index Goes Dangerously Low
The US Dollar Index (DXY) falling below 100 points signals the economy is not headed towards the right path. Institutional investors could offload equities and enter the commodity markets shielding their investments in safe haven like gold. The prices of gold could head north as the US dollar weakens.
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The decline comes at a time when JP Morgan warned that the US economy is at a “boiling frog” moment. JP Morgan warned that the growing $34 trillion US debt will bring dangers to the doorstep of the economy. The development could impact stocks, commodities, and the US dollar leaving no space for investors to shield their investments.
“The problem for the US is the starting point; every round of fiscal stimulus brings the US one step closer to debt unsustainability,” said JP Morgan strategist Michael Cembalest.
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“However, we’re accustomed to deteriorating US government finances with limited consequences for investors. And one day that may change (the boiling frog analogy). The US has run out of the road on that one,” Cembalest added.