Dollar Gains
Despite crazy inflation in the United States, there have been some positives in the economy as of late that haven’t been discussed as much. Recently, the US dollar has been strengthening compared to other global currencies for a variety of reasons, and economists have a lot to say about it.
The US is generally considered the safe haven for assets when it comes to global economies. This means that investors believe US assets will either retain their value or appreciate during market turbulence or uncertainty. Currently, there is heavy uncertainty in global markets, especially in Europe due to the Russian invasion of Ukraine. Due to this, investors are moving their assets to the US in order to escape risk, strengthening the dollar in comparison to the euro.
Another factor is the Federal Reserve’s aggressive interest rate plans, which have done most of the part in strengthening the dollar. The rapid increase in rates has incentivized investors to hold their money in interest-bearing US accounts in the form of dollars, which has contributed to the strength. Central banks across the world have been slow on raising interest rates, which is causing the shift to the US, but economists believe that it’s soon to end as the European Central Bank continues to increase their rates by large amounts. Dollar strength is at levels it hasn’t been in a while, and it differs from the 70s and 80s when inflation was high, but currency was weak.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
