The ICE U.S. Dollar Index has fallen over 3% so far this year to just over the 93 level as investors reacted to unprecedented pandemic-related monetary stimulus from the Federal Reserve and rock-bottom interest rates. The gauge traded below 89 in 2018, a level which would imply a further slide of more than 4%.
Goldman joins the likes of UBS Asset Management and Invesco Ltd. in predicting a weaker dollar as Biden extends his lead over President Donald Trump with less than three weeks to election day. It recommends investors short the dollar against a volatility-weighted basket consisting of the Mexican peso, South African rand and Indian rupee.
The strategists also suggest buying the euro, Canadian and Australian dollars against the greenback.
“The wide margin in current polls reduces the risk of a delayed election result, and the prospect for near-term vaccine breakthroughs may provide a backstop for risky assets,” they wrote.
