Russia and Ukraine Crisis plunges US dollar to alarming rates.
As the Russian Ukraine war continues with no end in sight, the dollar achieved its highest level since the early days of the crisis on Wednesday and is on set to have its best month since 2015.
The US dollar index, which compares the greenback to a basket of six major currencies, has been hovering around 102.37 since March 2020. During the pandemic, the dollar gained strength as investors sought a safe haven, driving the dollar index to a five-year high of 102.82.
The dollar index was trading at 102.22 at the time of writing, up 0.99 percent in the past five trading days and 3% in the last month. This change is reinforced by the expectation of US rate rises, as well as safe-haven flows spurred by declining GDP in China and Europe.
What you need to know
The dollar index has risen 3% this month, while the euro, yuan, and yen have fallen as traders bet that interest rates will rise faster in the US than in any other major economy.
Fears for Europe’s energy security and economy drove the euro to a five-year low of $1.0635 in early trade after Russia’s Gazprom indicated it will shut off gas supplies to Poland and Bulgaria later in the day.
The Bank of Japan meets on Wednesday and Thursday, and markets are anticipating projection adjustments or policy changes to attempt to halt the yen’s recent decline.
The Chinese yuan was under pressure in offshore trade, trading at 6.5902 per dollar, down more than 3.5 percent for the month. The South Korean won fell to a two-year low after North Korea promised to upgrading its nuclear arsenal.
After plunging more than 2% against the dollar this week as dismal retail sales data prompted a reconsideration of Britain’s rate outlook, sterling touched a new 21-month low of $1.2560 on Wednesday.
Bitcoin dropped to a six-week low of $38,228 overnight as speculators unloaded risky assets.