Why has the US dollar gained against major currencies recently?

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The US Dollar Has Gained Due to Softening US Economic Data and Rising Global Coronavirus Cases

The US dollar has recently strengthened against major currencies, driven by a combination of weakening economic indicators within the United States and a surge in global coronavirus cases that has prompted investors to adopt a more cautious stance. This shift has seen the dollar index rise approximately 1.9 per cent since the Democrats secured control of the US Congress two weeks prior, a period marked by renewed concerns over regional recovery prospects due to escalating virus infections and political instability in Italy.
US Economic Data Indicates Slowdown

Recent economic data from the United States has pointed towards a slowdown in activity. US retail sales, a key indicator of consumer spending, declined for the third consecutive month in December. This downturn is attributed to the reintroduction of measures aimed at curbing the spread of Covid-19, which have consequently led to job losses and a dampening effect on consumption, the primary engine of economic growth.
Global Health Crisis Fuels Cautious Sentiment

The escalating global health crisis has significantly influenced investor sentiment, bolstering demand for safe-haven assets like the US dollar. The worldwide death toll from coronavirus surpassed two million on Friday, with the World Health Organization issuing warnings that the situation could worsen. This grim outlook, coupled with the upcoming inauguration of US President-elect Joe Biden amidst heightened security concerns, has further amplified investor caution.
Political Developments and Stimulus Doubts

Investor confidence has also been affected by emerging doubts regarding the feasibility of President-elect Biden's proposed stimulus plans navigating through Congress. Adding to this, Janet Yellen, Biden's nominee for Treasury Secretary, is anticipated to signal an unwillingness to pursue a weaker dollar during her testimony before Congress, as reported by the Wall Street Journal. These political and policy uncertainties contribute to the dollar's recent upward trend.

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Why has the US dollar gained against major currencies recently?

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