Investment bank giant Goldman Sachs’ latest decision to withdraw from its pessimistic view of the US dollar is being rejected by financial markets.
While bitcoin is trading almost 1.5% higher on the day at $ 59,000 at the time of publication, the dollar index, which measures the value of the dollar against fiat currencies like the euro, pound and yen, is hovering 0 , 5% down, at 92.56.
Goldman Sachs on Friday recommended closing dollar short trades against a basket of currencies, including Australian and New Zealand dollars, which are sensitive to commodities.
“While we still expect these currencies to appreciate against the dollar in the coming quarters, steady US growth and rising bond yields can keep the dollar supported in the short term,” wrote strategists like Zach Pandl in a note titled ” tactical retreat, ”according to Bloomberg.
Goldman recommended the dollar overdraft on October 9, when bitcoin was trading close to $ 11,000. To date, the leading cryptocurrency by market cap is changing hands close to $ 59,000, having reached a record high of $ 61,557 last month.
Most major fiat currencies have also recorded stellar gains in the past six months. Almost all dollar-denominated assets have recovered significantly in the past 12 months, courtesy of the Federal Reserve’s open liquidity-enhancing program.
The bets against the dollar have been one of the most competitive trades of the past 12 months, according to monthly surveys by Bank of America fund managers.
Goldman, however, now fears that selling pressure around the dollar may weaken due to increased Treasury yields. The 10-year yield has risen 80 basis points this year, making the dollar attractive to investors looking for income.
The jury has yet to decide whether the tide is turning in favor of the dollar, pulling bitcoin down. If the recent price action is any guide, the likelihood of bitcoin melting into a high DXY potential appears low.
The dollar index witnessed a corrective jump in the period from January to March, rising 3.66% after three consecutive quarterly declines. Even so, bitcoin grew 100%.
The cryptocurrency remained under bidding, as the increase in institutional demand provided investors with clarity about the digital asset’s value proposition in relation to traditional markets, weakening its correlation with stocks, gold etc.