Dollar, currency slayer

• The US Dollar is continuously strengthening its position against the other currencies, as shown by the US Dollar Index, an index measuring the relative value of the Greenback against a basket of six influential currencies (Euro, Yen, Pound, Canadian Dollar, Swedish Krona and Swiss Franc). Indeed, its value increased by about 14% since the beginning of 2022, reaching a level hit in June 2002.Despite the slowdown in the US economy, investors believe that investing in the US Dollar is still a relatively safe bet.

• On the one hand, the hawkish shift in the Fed’s monetary policy has contributed to make US Treasury bonds more and more attractive in terms of yield, supporting the demand for USD. On the other hand, investors keep seeing it as a safe haven to invest in especially in times of crises filled with recession fears.

• This rise in its value has also affected the economy of many emerging countries, as they have issued part of their debt in USD. As a consequence, their debt payments are getting increasingly higher and many investors are forecasting a wave of defaults.

Source: Bloomberg