The US Dollar Will Continue to Be Dominant
The dollar has gained strength against the currencies of other major economies.
The US economy has been less affected by geopolitical tensions than others, and it is also more resilient, which has boosted the currency. Europe, for example, is experiencing an energy crisis because it is far more reliant on energy exports than the United States.
Inflation in the United States is also relatively sticky versus countries such as China, where inflation is closer to the central bank’s target. The Canadian dollar has also been strengthening, aided by its neighbor. Although the Canadian dollar has weakened against the US dollar, it has strengthened against other currencies such as the pound, euro, Australian, and New Zealand.
On Tuesday, the Chinese currency renminbi, or Yuan, fell 438 basis points to 7.1668 against the US dollar.
The pound rose on Tuesday as risk sentiment improved after Rishi Sunak was elected British prime minister. Meanwhile, the euro strengthened ahead of Thursday’s European Central Bank (ECB) rate hike.
The US dollar rose slightly but remained at its lowest level since October, showing that the Fed’s interest rate hikes are slowing the world’s largest economy.
On Tuesday, Rishi Sunak became Britain’s third prime minister in two months, tasked with dealing with an escalating economic crisis and a fractious political party.
The euro fell 0.16% to $0.9858, but it was still close to its highest level since early October, with the ECB expected to raise rates by 75 basis points on Thursday to cool hot inflation. In other news, the dollar index, which compares the US currency to six major peers, rose 0.16% to 112.04.
After the suspected Bank of Japan (BOJ) intervention on Friday and Monday, the yen remained stable at around 149 per dollar.