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Dollar Value Could Slide This Year As Global Economy Picks Up After Covid, Analysts Say – Forbes

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Topline

The strength of the U.S. dollar may start to slip during the remainder of 2021 as the U.S. and global economies improve following the worst of the Covid-19 pandemic, according to a research note released Wednesday by UBS and echoed by analysts who told Forbes low interest rates in the U.S. and growing consumer and business interest in buying foreign goods could dampen the greenback.

Key Facts

The DXY Dollar Index – a measure of the value of the U.S. dollar against currencies of major U.S. trade partners, including the euro and pound sterling – has climbed about 3.5% year to date, after dropping about 7.1% last year.

The rise of the dollar has been accompanied by an almost doubling of the 10-Year Treasury yield year to date — higher yields (reflecting optimism for higher U.S. economic growth rates and the likelihood of higher inflation) tend to increase demand for U.S. Treasuries from foreign buyers whose domestic bonds in many cases offer lower or even negative yields.

But in a research note published Wednesday, Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote he expects the dollar to slide this year – he thinks the euro will equal $1.25 by year-end (up from $1.18 currently); and the pound sterling will equal $1.49 by year end (up from $1.38 currently).

Haefele explained the dollar is likely to slip versus the euro because he expects economic growth to accelerate in Europe and elsewhere as “the pace of vaccinations picks up in the Eurozone,” noting that a “broad-based global recovery” typically supports the euro.

Concurrently, Haefele noted, “robust” U.S. economic growth should benefit the currencies of foreign exporters and commodity producers because they will likely appreciate in value against the dollar as “investors abandon the safe-haven [of U.S. assets] and explore [assets] outside the U.S.”

Haefele also said that he expects the Federal Reserve to keep interest rates low for an extended period of time (low interest rates tend to pressure the dollar lower as investors seek higher-yielding foreign currencies).

Key Background

John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, told Forbes he also thinks the dollar rally will weaken this year as he does not expect Treasury yields to rise much further. A strengthening U.S. economy, Stoltzfus explains, typically hurts the dollar because more U.S. businesses and individuals can buy foreign goods and assets, thereby increasing the value of currencies of exporting countries. “This has already begun to take place,” he adds. John Herrmann, U.S. rates strategist at Mitsubishi UFJ Financial Group, told Forbes that for the remainder of the year, either the pace of the dollar’s gains may likely slow down, or it possibly could even reverse course and decline – depending on the relative strengths of the U.S. and foreign economies. “Will the U.S. economy and vaccine programs continue to outperform upon a relative basis, or, will foreign nations ultimately turn around their management of the pandemic and, in so doing, strengthen their economic prospects,” he offered.  The Fed also will play a major role in determining the fate of the dollar. Brian Rose, a senior economist at UBS, told Forbes the Fed is likely to keep rates near zero through the end of 2023. “Unless the Fed is hiking rates, larger budget and trade deficits [meaning the U.S. buys more imports than it exports] should hurt the dollar,” he adds. 

What To Watch For 

Shahab Jalinoos, chief foreign exchange and rates strategist at Credit Suisse, told Forbes that profits generated by multinational exporters can be hurt by a stronger dollar because it can make U.S. exports more uncompetitive and therefore hurt revenues, though overall global demand is a more important factor. Lower imports costs are an offset too. “We would not expect a material net profits impact one way or another while the US dollar is in a range of plus or minus 10% from current levels… as these levels are not seen as either especially cheap or expensive on a long term basis,” he added.

Surprising Fact

While the dollar is up so far this year, the DYX Dollar Index is actually down about 6.8% over the past 12 months. “This indicates that the dollar had already begun to weaken as the pandemic risk was perceived to be reduced by the scale of the U.S. response and anticipation of vaccines of greater efficacy to counter the spread of Covid-19,” Stoltzfus says.

Further Reading

The Consensus On The U.S. Dollar Is Too Bearish (Forbes)

What ‘Backs’ The Dollar? Easy: Production (Forbes)

Could Bitcoin Replace The U.S. Dollar? (Forbes)

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Province Invests in Wellington County Businesses to Boost Local Economy – Government of Ontario News

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Province Invests in Wellington County Businesses to Boost Local Economy  Government of Ontario News



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Powell meets a changed economy: Fewer workers, higher prices – 95.7 News

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WASHINGTON (AP) — Restaurant and hotel owners struggling to fill jobs. Supply-chain delays forcing up prices for small businesses. Unemployed Americans unable to find work even with job openings at a record high.

Those and other disruptions to the U.S. economy — consequences of the viral pandemic that erupted 18 months ago — appear likely to endure, a group of business owners and nonprofit executives told Federal Reserve Chair Jerome Powell on Friday.

The business challenges, described during a “Fed Listens” virtual roundtable, underscore the ways that the COVID-19 outbreak and its delta variant are continuing to transform the U.S. economy. Some participants in the event said their business plans were still evolving. Others complained of sluggish sales and fluctuating fortunes after the pandemic eased this summer and then intensified in the past two months.

“We are really living in unique times,” Powell said at the end of the discussion. “I’ve never seen these kinds of supply-chain issues, never seen an economy that combines drastic labor shortages with lots of unemployed people. … So, it’s a very fast changing economy. It’s going to be quite different from the one (before).”

The Fed chair asked Cheetie Kumar, a restaurant owner in Raleigh, North Carolina, why she has had such trouble finding workers. Powell’s question goes to the heart of the Fed’s mandate of maximizing employment, because many people who were working before the pandemic lost jobs and are no longer looking for one. When — or whether — these people resume their job hunts will help determine when the Fed can conclude that the economy has achieved maximum employment.

Kumar told Powell that many of her former employees have decided to permanently leave the restaurant industry.

“I think a lot of people wanted to make life changes, and we lost a lot of people to different industries,” she said. “I think half of our folks decided to go back to school.”

Kumar said her restaurant now pays a minimum of $18 an hour, and she added that higher wages are likely a long-term change for the restaurant industry.

“We cannot get by and pay people $13 an hour and expect them to stay with us for years and years,” Kumar said. “It’s just not going to happen.”

Loren Nalewanski, a vice president at Marriott Select Brands, said his company is losing housekeepers to other jobs that have recently raised pay. Even the recent cutoff of a $300-a-week federal unemployment supplement, he said, hasn’t led to an increase in job applicants.

“People have left the industry and unfortunately they’re finding other things to do,” Nalewanski said. “Other industries that didn’t pay as much perhaps … are (now) paying a lot more.”

Christopher Rugaber, The Associated Press

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Dialogue NB Seeks To Rebuild An Inclusive Economy Through Conversation – Huddle – Huddle Today

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MONCTON – Dialogue NB CEO Nadine Duguay-Lemay says the business community has an integral place in a conversation about building a more equal and just New Brunswick.

That very conversation will take place on September 27 in Moncton with Dialogue Day 2021.

“When we talk about anti-racism, notions of equality, diversity, acceptance and inclusion and all those notions we celebrate, it’s not something we can do on our own,” said Duguay-Lemay.

“The business community actively needs to participate, if anything, because those topics concern them. That’s why you see so many business support the event.”

The volunteer-led non-profit organization plans to host an inclusive conversation on Monday at Moncton’s Crowne Plaza and virtually, online.

Dedicated to building social cohesion in New Brunswick, the sold-out event will feature discussions about racial justice in the workplace, rethinking the economy as it recovers from the pandemic and how to be a better ally to Indigenous people.

The event, which has sold out of in-person seats, will feature Jeremy Dutcher, a Wolastoq singer, songwriter, composer, musicologist and activist from Tobique First Nation, as its keynote speaker.

The mandate of the discussions is to ensure everyone feels heard, valued and that they belong, making diversity an asset – something Duguay-Lemay considers imperative to a functional economy.

“What I’ve found is that people don’t like to go into uncomfortable discussions. Some people want to embrace social cohesion but don’t know where to start, or are afraid of saying the wrong thing. This is our expertise – we’re good at the art of dialogue and multiple viewpoints at one table,” she said.

“We need a lot of different voices and perspectives at the table to rethink the system for the wellbeing of all. These discussions shouldn’t be happening in isolation.”

Duguay-Lemay said New Brunswick faces many economic challenges, noting a diverse workforce will help recover from those challenges.

She stressed that the business community needs to work toward a goal of truth and reconciliation, and in a call with Huddle, rebutted the metaphor of everyone being on the same boat during the pandemic.

“I’d argue we’re all facing the same storm, but not in the same boat. Some people are in yachts and some are in little boats about to capsize,” she said.

Other voices are emerging – female and Indigenous, for example – looking to address poverty and wage inequality and unfairness, employment access, systemic racism and environmental degradation, noted Duguay-Lemay, adding that the province’s 4,418 non-profits need more recognition as an economic partner.

“Inclusion is embedded in our DNA as Canadians. We’re already a country and province that abides by those laws, so it’s important to look at inclusion,” she said.

The conversations will also focus on racial justice in the workplace, how the pandemic hurt Indigenous and black Canadian employment, versus non-minorities, access to employment – and the social barriers that exist for racialized workers.

“I invite all organizations, employers, public and non-profits to look at their practices in place and ask if they walk the talk for truth and reconciliation. We’re all treaty people – how do we uphold this?” said Duguay-Lemay.

“We want to at least demonstrate to Indigenous people in New Brunswick that we hear their plight and are serious about truth and reconciliation.”

Greater social cohesion is the best step forward, Duguay-Lemay noted, adding that real dialogue can build an economy that works for everyone.

She said matters of racial justice in the workplace – and specific matters, such as owners objecting to the declaration of September 30 as a statutory holiday, contending that they can’t afford it – will be among the economic issues for which solutions will be sought.

The conversation will also focus on how the province’s recovery from the pandemic has exposed inequalities in the economy.

Duguay-Lemay stressed the need to learn from the way the pandemic exposed inequalities, and rethink a system that works for everyone.

“We need to think differently and it really shouldn’t be based on the interests of the privileged,” said Duguay-Lemay.

“As employers are looking to attract and retain talent, we hear about skill shortages all the time. This becomes a matter of attracting talent, whether from newcomers or tapping into Indigenous communities, how can we make our workplaces more equitable and inclusive?

The event will feature an “eclectic” round table of specialists, artists, activists and experts from numerous sectors, and identities in New Brunswick, with opportunities for networking, inspiration for change with concrete examples and skills to help become a social leader.

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