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Every year, top currencies compete to come out on top of the global market. At the beginning of the year, already more than 30 central banks around the world were cutting interest rates in a desperate attempt to avoid falling into recession. The COVID-19 pandemic has only intensified that process. Low-interest rates usually mean a weak currency, as investors elsewhere may gain a better return on their assets.

In 2019, the US dollar remained the one to beat, despite the fact that the Federal Reserve cut interest rates three times last year as the economy slowed down. For the British pound, 2019 was full of ups and downs but ended the year higher. The Chinese yuan and Indian rupee weakened significantly, while the Canadian dollar held strong. As for Bitcoin, it was all over the place, as usual.

The US dollar

Despite its good run in 2019, the US dollar is expected to be significantly affected by the global pandemic. The damage done is already larger than the financial crisis and maybe even the Great Depression. The world is currently facing the worst economic crisis in modern history.

In all this uncertainty, despite the negative oil prices and clear economic crisis, some of the best forex brokers have hailed the US dollar as a safe haven. Despite the talk that the dollar would lose its reserve currency status, it managed to come out on top. For more than a century, the dollar has been the world’s leading currency. Today, more than 60% of all reserves in foreign banks and 40% of all debt are kept in US dollars. Investors want safety, and the US dollar is their best bet.

Despite the global central banks injecting emergency liquidity in billions of dollars and reinforcing exchange lines with other global central banks in recent days, overall dollar funding pressure has still been intensified.

With the coronavirus pandemic threatening to completely paralyze the global economy, investors are trying to sell whatever they have to keep their money in dollars, all due to the volatility and unsureness created by the pandemic.

Euro

The COVID pandemic has taken a significant toll on the European economy. With Italy and Spain suffering the worst from the virus and others like Austria and Germany being on lockdown, there is little to no economic activity going on in the EU. experts warn that if the lockdown continues for months, it could cost the EU and the euro currency a lot.

Some even go as far as saying that the global pandemic could bring an end to Eurozone as we know it. During the 2008 crisis, many thought the same, but the euro managed to stand its ground and rose as one of the leading currencies worldwide.

All parties of the currency bloc are equally impacted by the economic effects of the coronavirus. However, the answer to the crisis is sporadic, as national interests override the “spirit of cooperation”. The response by the EU member states seems to be mostly domestic – exacerbating divisions that were becoming more and more evident after Brexit, instead of uniting Europe in the time of the crisis.  

The future of the euro seems more frightful than ever. If Europe wants to come out strong from the pandemic, it will have to double down on cooperation and help the countries that are struggling the most, like Italy, which will not make it out without having to pay extremely high economic and humanitarian costs.

Canadian dollar

The Canadian dollar came out of 2019 as one of the strongest currencies, as the Bank of Canada has kept rates on hold. However, experts are noting that the currency for now looks overvalued and that the growth differential might narrow against the other developed economies in 2020.

Surely enough, the main stock market in Canada plunged to an eight-year low in early March and the Canadian dollar weakened as economic uncertainty caused by the growing coronavirus outbreak undermined policymakers’ attempts to relieve tension in the financial system.

However, thanks to the efforts of the Bank of Canada and the government, in early April the Canadian dollar again strengthened compared to its American counterpart. There is no telling at this point how the Canadian dollar will hold amid the global financial crisis. However, coming back from the eight-year low in a span of just a month should give us some hope that this currency will hold its ground in the face of the crisis.