The US dollar is causing concern among investors, as it surges to a seven-week high early in March, now down at the start of April. The dollar, the dominant global currency, reached a 20-year high in 2022 when the Federal Reserve raised interest rates.
US Dollar Concerns amongst Media
4/2/2023
Inflation seemed to have slowed the rise of the dollar, but as the Federal Reserve has battled to control inflation, the currency has surged again. A stronger dollar means US-made products are more expensive for foreign buyers, overseas revenue decreases in value and global trade weakens. According to CNN this is bad news for multinational companies, which earn around 30% of their revenue in markets outside the US.
The dollar's course is heavily influenced by inflation and the Federal Reserve's monetary response. Investors are closely watching the next Federal Reserve policy meeting, which is three weeks away, for signals about the direction of rates, as well as the next jobs report for signs of the labor market softening.
Another major threat to the dollar is the ongoing debt ceiling fight in Congress. The United States could begin to default on its financial obligations in the summer or early autumn if lawmakers do not agree to raise the debt limit. This could lead to a downgrade in America's credit rating and could cause investors to sell off their US assets and move their money to safer currencies. Treasury Secretary Janet Yellen has warned that this could undermine the dollar's role as a reserve currency and cause job losses and increased borrowing costs for Americans.
Furthermore, according to reports, a top Russian official has claimed that the BRICS alliance is working on creating its own currency. BRICS is an acronym for five leading emerging economies: Brazil, Russia, India, China and South Africa. Babakov reportedly stressed the importance of both nations working towards a new medium for payments, adding that digital payments could be the most promising and viable. He also said the currency could benefit China and other BRICS members, and not the West.
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