- November 8, 2022
- Posted by: Stratford Team
- Category: Economy
Author: Michael G Plummer, JHU
The US dollar is on a tear. According to the Federal Reserve Bank of St Louis’s US Dollar Index, it has risen by approximately 13 per cent in 2022 against a broad basket of currencies. It is at its highest level since the 2008–09 global financial crisis (GFC). Asian currencies have not been spared.
The Japanese yen and the Chinese RMB are at two-decade and 14-year lows, respectively. In 2022, the US dollar has appreciated by one-fifth relative to the South Korean won and by over one-tenth against the Malaysian ringgit, Philippine peso and Thai baht.
There are many reasons for the underlying strength of the dollar. Financial markets respond to risk and reward — and these are both changing in support of investments in the United States. Heightened risk in the global marketplace leads to a ‘flight to safety’ phenomenon in favour of US assets, even if the main shock originates in the US market as it did during the…