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Inflation concerns cause US dollar to jump 10% in 6 months

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The coronavirus outbreak sparked a global price boom, which was fueled even more by Russia’s invasion of Ukraine. As a result, the US dollar, which is regarded as a safe haven, has grown tremendously in the last six months.

This recent rally has returned the greenback to a two-decade high. The US dollar index was trading at 104.55 at the time of writing, up 10.84% in six months and 4.31% in a month.

The surging dollar has prompted many central banks to abandon a longstanding preference for weaker exchange rates, shifting from encouraging growth to bringing down inflation.

Despite rising inflation, countries such as Nigeria and Japan have resisted the impulse to raise interest rates. Inflation in Nigeria reached 15.92% in March, up from 15.7% in February 2022.

Japan’s inflation is continuing to rise, reaching a 26-month high as more businesses pass on rising raw material and energy costs to consumers. In March 2022, Japan’s inflation increased by 0.8%.

What you should know

The Federal Reserve of the United States hiked its benchmark funds rate by 50 basis points (bps) last week, and strong job data has strengthened bets on additional significant hikes, with inflation data due on Wednesday providing the next potential positive surprise.

Nevertheless, the US’ current hawkish stance has had a sleeping effect across markets.

The yield on benchmark 10-year U.S. government bonds has climbed a staggering 163 basis points this year.

The euro was down 9.35% within 6 months trading at $1.0508, the currency lost 3.29% against the dollar in a month.

The yen was close to two-decade lows at 130.96 per dollar, while sterling wallowed at $1.2294, barely above Friday’s 22-month low.

The Canadian dollar hit its lowest since December.
Lockdowns in Shanghai deepened, dragging the yuan to a new 18-month low of 6.7110 per dollar.

Cryptocurrencies have been hammered, and bitcoin is nearing its lowest levels of the year at $33,520 , while ether is at $2,439 at the time of writing this article.