The Dollar Is Falling, The Hryvnia Is Unstable: In What Currency Is It Better To Store Money In 2021

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Analysts at Citigroup, one of the world's largest financial corporations, predict a 20% drop in the dollar against other global currencies in 2021. Experts at Goldman Sachs also said that the dollar will no longer dominate the global monetary system.

Pandemic and related restrictions, the program will support the US economy by the Federal Reserve System (Federal Reserve System -... Ed) and the positive results from clinical trials of a vaccine against the coronavirus - these are the main reasons that the US currency is losing its position in the global financial market.

According to Bloomberg, in October 2020, the euro overtook the dollar in terms of the number of international payments. This happened for the first time since February 2013.

The editors of MC.today figured out what are the forecasts in the financial sector for 2021 and whether it is worth keeping your savings in dollars.

Why is the dollar falling

The outflow of investors and the decline in the value of shares of companies in the economy is called ...
... a "bear market". Due to the massive distribution of the vaccine, the US market will show all signs of a "bear". This is what Bloomberg writes with reference to Citigroup analysts. The dollar will repeat the path that has been seen since the early 2000s when the currency began a multi-year decline.

The mechanism is as follows: during a crisis, investors sell risky assets and invest in gold, dollars, and bonds (issue-grade debt security. - Ed.). For a while, such a process strengthens the country's internal currency.

But if the coronavirus vaccine spreads around the world, global trade will pick up and economic growth will begin. Investors will shift their focus from US assets to international assets that will be riskier, but at the same time more profitable.

These words are also confirmed by the economist of the Swiss banking group Lombard Odier Sami Chaar: after the victory over the pandemic, the world economy will catch up extremely quickly.

The most daring forecast for the dollar's fall came from economist Stephen Roach, a senior fellow at the Institute for Global Relations at Yale University. Back in June 2020, he predicted a weakening of the US dollar by 35% against other major currencies.

Hryvnia prospects

In the draft budget of Ukraine for 2021, the average annual exchange rate of the hryvnia to the dollar is fixed at around 29.1 hryvnias per dollar. However, the instability of the Ukrainian currency is influenced by a number of factors, primarily internal ones. are the demand for currency in the domestic market, the budget deficit, the government's actions in the context of the coronavirus, reforms, the pace of economic recovery and production.

According to Oleksandr Paraschiy, head of the analytical department at Concorde Capital, today it is difficult to make predictions about the positions of the hryvnia in 2021. He emphasizes that cooperation with the International Monetary Fund (IMF) and the European Union will affect the stability of the national currency.

Economist Dmitry Boyarchuk on the air of the Ukraine 24 channel suggested that economic recovery and increased demand for imports will also put pressure on the exchange rate in the coming year. This can lead to a depreciation of the national currency. To avoid shock shocks, this trend will be curbed by significant foreign exchange savings.

On the other hand, a weakening dollar may provoke global investors to invest in Ukrainian securities, which will strengthen the hryvnia. So thinks the head of the macroeconomic research department of the ICU group Sergey Nikolaychuk.

According to the NBU, in November 2020, Ukrainians bought more currency for the first time than they sold: $ 1.44 billion in equivalent versus $ 1.32 billion.

Despite the decline in the index of the American currency in the world, Ukrainians still trust the dollar and prefer to keep their savings in this currency.

"Don't put all your eggs in one basket."

Dragon Capital sales specialist Serhiy Fursa believes that Ukrainians should continue to adhere to the principle of diversification - the distribution of savings between the main currencies: the dollar and the euro. Then the rise in the value of one currency will compensate for the fall in the other.

But, according to analysts, it is not worth converting the hryvnia into the British pound or the Japanese yen. First of all, the currency should be freely convertible: it can be problematic to sell pounds or francs even in the regional center. And secondly, the gap between the cost of buying and selling a slow-moving currency can cause more losses than the exchange rate difference between traditional currencies.