U.S. dollar may lose reserve currency position with 11% crash … Analysts say Nigeria can benefit if we devalue naira

The U.S.’s currency, the dollar, has fallen to years-low, to the extent that analysts are arguing if it still possible the dollar can retain its position as a reserve currency.
But it is really not all about doom and gloom. It appears is a well thought deliberate policy to make their exports more competitive and have more money to deal with post-COVID pitfalls.
A weaker dollar is likely to improve the United States’ trade balance by making its exports more competitive. Last year, the International Monetary Fund (IMF) said the dollar was overvalued by 6-12 per cent and could have been overvalued by as much as 20 per cent before the slide, so the reset is likely to bring it closer to its true value.
Analysts told Blueprint that, a week dollar would bring lower revenue from crude oil and other export. John Okere, a retired banker, said the way out for the Nigerian government is to devalue it naira and possibly converge the various rates to also rake in more money from the little exports from Nigeria to shore up revenue.
Sola Makinde, an economist in Lagos agrees with John, saying, the only out is devaluing of currency since we are not much of an exporting nation.
After hitting a 3-year high on 20th March, the Dollar Index–a measure of the currency’s strength against a basket of six international currencies–has declined nearly 11 per cent in one of its most dramatic slides in years. The greenback has fallen so much that hedge funds have turned bearish against the currency for the first time in years.
A key reason why the greenback has been losing momentum can be chalked up to the Fed’s expansionary monetary and fiscal policy as well as its massive Covid-19 relief program. The central bank has undertaken a series of interest rate cuts, with the last one coming in March when it lowered the benchmark rate to zero to 0.25 per cent, marking only the second time that rates were effectively lowered to zero (the first time was during the 2008 financial crisis).
The Fed also launched a $700B bond-buying program as well as a generous stimulus to shelter the U.S. economy from the ravages of the pandemic. This includes up to $2.3 trillion in lending to support state and local governments, employers, households and financial markets. The combined effect of these measures has been an increasing supply of U.S. dollars hence the gradual devaluation.
In the past, President Trump has never hidden his disdain for the Fed and its hawkish policies, repeatedly drumming up the fact that the central bank’s interest hike regime was contributing to an overly brawny dollar and a sluggish economy. Trump had even gone as far as asking the White House to explore ways to weaken the currency in a bid to boost exports and spur economic growth.

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