Talal Wasif Qavi Analyses The High-Flying US Currency
It is not only the Pakistani rupee that has recently taken a battering by the Strengthened dollar but nearly every major currency has lost ground against it and the strength it has gained is the offshoot of the US Federal Reserve’s campaign to rein in inflation through higher interest rates. Quite obviously stronger dollar means cheaper imports.
And trips abroad for Americans but it can also weigh on other economies, especially in the face of global conflict, because most commodities are priced in dollars, making necessities like oil and wheat more expensive. It may also have serious repercussions for public debt as repayment, as well as interest payments, increase making it difficult for debtors, particularly the developing countries.
It is recorded that the value of the Strengthened dollar has gone up by 20 percent just this year and this surge has put other countries trying to boost their economies in a challenging position: raising interest rates would boost their currency but also put the brakes on economic recovery.
China, which has slashed interest rates to tackle a slowing economy and stem a housing downturn, has seen the yuan fall to its weakest level in more than 14 years. Meanwhile, inflation is reaching record levels as the rate of price increases in the eurozone is expected to surge to 10 percent in September. From London to Tokyo, people are feeling the effects of diminished purchasing power as governments try to combat inflation and a weakened currency.
Value Of Dollar
The surge in the value of dollar has seen the British pound sink to an all-time low of $1.03, a horrendous comedown from the exchange rate of $2 to a pound in the late 2000s and the weakened pound will make life harder for Brits in many ways, increasing already inflated imported food prices and jacking up energy bills, since about half of the gas used in the United Kingdom is imported from the international market.
The US Federal Reserve has raised interest rates five times this year drawing widespread criticism, particularly from European Central Bank as the Euro and dollar reached parity for the first time in two decades. Euro-zone is grappling with the energy and world hunger crisis sparked by the Russian invasion of Ukraine and its broader fallout as Ukraine and Russia are among the world’s top producers of grain, cooking oil, and fertilizers, and the Russian invasion has sent prices skyrocketing and ignited shortages of food staples around the world.
The high-climbing Strengthened dollar compelled Japan, for the first time since 1998, to intervene in currency markets this month to buy yen and sell dollars, a move aimed to boost the local currency. In contrast to their American and European counterparts, the Japanese are determined to keep interest rates low, to fuel the country’s fragile economic recovery from the pandemic but that is driving the yen’s plunge against the dollar. Japanese people are feeling the effects.
A weaker currency makes it more expensive to import fuel and food, and workers saw their real wages shrink as prices rose. A depreciating yen and stalling consumption could undermine Japan’s economic gains, which have lagged compared with those of Europe and the United States.
High-Quality Scoring Of Sweden
Sweden consistently scores high in quality-of-life rankings, with extensive social benefits, and claims one of the highest GDP per capita figures, marshaling a highly skilled labor force but inflation is sinking its teeth into the nation’s economy, which is expected to contract next year, pummeling businesses and households. Last month, the country’s central bank, the Riksbank, raised interest rates a full percentage point, an aggressive move to tame rising prices and the biggest rate hike from Stockholm since 1992 but just a day after the Riksbank’s move.
The Federal Reserve announced its third consecutive 0.75 percent rate hike, outpacing other central banks in the race to curb inflation and driving the losses of other currencies. The Swedish crown has since fallen to its lowest levels against the dollar, as the Fed continues its muscular tightening policy, outpacing central banks around the world.
As much of Europe faces economic turmoil and the threat of recession, the Swiss franc, like the US dollar, has served as a safe-haven asset. When Russia escalated tensions against Ukraine earlier this year, investors flocked to the Swiss franc, which is seen as a safe store of value amid global crises, owing to the country’s political stability and economic policy. But it has still lost some ground to the Strengthened dollar.
However, the Swiss are getting pinched by rising prices as inflation hit its highest level in nearly 30 years. In response, the Swiss National Bank followed other European nations and the United States by raising interest rates, ending what had been the nation’s seven-year run of negative interest rates. The Weekender