© STR | AFP | Getty ImagesA Chinese bank employee counts 100-yuan notes and U.S. dollar bills at a bank counter in Nantong in China’s eastern Jiangsu province on August 6, 2019.
A "big question" for investors right now over the U.S. dollar is whether it should be trading at a safe-haven risk premium as concerns rise over a potential second wave of virus infections, Goel told CNBC's "Street Signs" on Monday.
He said that in a potential resurgence of cases, the U.S. dollar could weaken against most of its peers in developed markets, and to an extent, possibly China too.
His comments came after the U.S. reported a spike in the number of cases over the weekend. More than 30,000 new cases were reported on Friday and Saturday — the highest daily totals since May 1, according to data compiled by Johns Hopkins University.
Meanwhile, the recent detection of a cluster of infections in the Chinese capital of Beijing also stoked concerns of a potential resurgence of the virus in the country, where Covid-19 was first reported before it spread to the rest of the world.
On Monday afternoon Singapore time, the U.S. dollar index stood at 97.503 against a basket of its peers. Earlier in June, it was trading at levels below 96.5.
Since March, investors have been favoring the greenback over its peers in the Group of 10 countries, in part due to "emergency dollar demand" as the world went into a synchronized shutdown to stem the spread of the coronavirus outbreak, Goel said. Investors typically flock to the U.S. dollar in times of uncertainty, in part due to its position as the world's reserve currency.
"That emergency dollar demand seems to be waning," he said.
Furthermore, "the exit strategy for the U.S., if anything, looks poorer than it is for the rest of the world," he said referring to the lifting of lockdown measures and reopening of the economy. "Our mobility tracker suggests that, bulk of Europe, for example, is opening up faster than (the) U.S. is."
Yuan fundamentals getting 'more favorable'
Asked about the outlook for the Chinese yuan, Goel said the fundamentals for the currency in terms of the underlying balance of flows are "very much getting more favourable."
The onshore Chinese yuan was last trading at 7.0804 against the greenback, having seen levels around 7.11 earlier in June. Meanwhile, its offshore counterpart changed hands at 7.0744 per dollar, compared to levels around 7.12 seen earlier in the month.
As China progressively opens up its financial markets, and is being included in various indexes, and introduces more local currency-denominated assets, the "portfolio flow story incrementally does become more positive" for the yuan, the strategist said.
"We've seen yuan being relatively sort of stable and within a range, and that is partly to do also with ... a lot of dividend payments and the fact that obviously there was a lot of noise along the U.S.-China axis as well," Goel said. "Of late, we have seen that it feels like at least the phase one trade deal seems largely secure, for now."
Relations between the U.S. and China have been strained on several fronts: From the trade war that saw both sides slap punitive tariffs on each other's goods, to technology, to their disagreement over the origins of the coronavirus outbreak.
The strategist also cited the U.S. Federal Reserve's reaffirmation that it will be keeping interest rates "lower for longer ... for a while to come," as the central bank's moves to support the financial markets following the coronavirus outbreak.
"I think all that does give you a little bit of a window here for potentially, the (yuan) to trade sort of stronger versus the dollar and potentially through 7 as well," Goel said
Still, he cautioned that the "drag" and headwind ahead for the Chinese currency primarily centers around concerns ahead of the U.S. elections, where more noise between the two countries could raise the yuan's risk premium.
"I think that's the one thing which is holding back the (Chinese) currency," Goel said.
Comment: See also: A crash in the dollar is coming