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FRANKFURT (Reuters) – For each and every one, the U. S. dollar is making its mark on each and every corner of the global economy: it’s the currency in which important commodities are bought and sold, and it’s the haven investors turn to. moments of turbulence.
The dollar is now at a 20-year high against other global currencies, thanks in part to expectations that the Federal Reserve will raise interest rates faster than most.
Here are 10 reasons why you should be careful:
AMERICAN ABROAD: A strong dollar is wonderful if you are an American tourist. Hotels, meals or a designer bag are less expensive in comparison, whether in London, the French Riviera or Cancun. Needless to say, the opposite is true. for the traveler traveling to the United States, unless you bought your tickets to Disneyland or Las Vegas a long time ago, it will charge you more.
THE JOYS OF PARITY: This is an additional blessing welcome for Americans traveling to one of the 19 countries that use the euro and a small consolation for European tourists in the United States. call it quite a bit one by one now.
MADE IN AMERICA: For buyers around the world looking for the most productive U. S. brands, the strength of the dollar means they may end up paying a premium unless local suppliers try to cushion the effect of currencies. In recent days, U. S. corporations such as Mattel Inc, maker of the Barbie doll and Hot Wheels cars, have said they are being hit by the emerging dollar, even as customers in general appear to be in a position to settle for higher prices. For customer goods giant Procter
EMERGING PROBLEM – For Argentines, the dollar’s rise against the peso has led to a doubling of local costs in just one year and a spiraling economic crisis. Governments and companies in many emerging economies are financed by issuing bonds in U. S. dollars. the amount they owe is now priced higher when measured in their local currency. Exploiting the market for more credit is also more expensive because U. S. rates have risen.
RAW MATERIALS: Countries such as Turkey and Egypt, which import many of their uncooked fabrics, have been hit by a double whammy. Most commodities, from oil to wheat, are denominated in U. S. dollars, meaning they pay more in their local currency for each barrel. or bushel they buy. This comes at a time when the value of many of those fabrics has already been at an all-time high for several years due to the war in Ukraine, extreme weather conditions, and the aftermath of the COVID pandemic.
HOME SUPPORT: A strong dollar is good news for other people in poor countries like Mexico and Guatemala who have cash sent through parents running in the United States. The fallout from COVID-19 dealt a severe blow to those remittances in 2020, but they have noticed a stable recovery ever since.
INFLATION: Even for richer countries like Germany, a strong dollar can be a problem, as it is helping to drive record inflation through more expensive imports. Local central banks have responded by raising interest rates, making lending more expensive and slowing economic growth. .
RUBLE RALLY: The Russian ruble is the only currency in the world that is comfortably in the dark against the dollar this year, an unforeseen outcome for a country under foreign sanctions following its invasion of Ukraine. But this force— a somewhat synthetic result of exchange controls — doesn’t bring much to the Russians. Moscow would possibly be reaping tens of billions of dollars each month from its energy sales to the West, yet Russian families are still unable to withdraw their savings in foreign currency. And many Western brands, from Adidas to H
BITCOIN: Traded as the ultimate hedge against inflation, the world’s largest cryptocurrency has damaged its promises and failed more than a part this year despite rising costs from customers in large parts of the world. Legions of individual investors attracted by cryptocurrencies last year The bull market has now abandoned virtual tokens to park their savings in a U. S. currency they understand as safer, and which is starting to pay interest again.
REINFORCE: If the value of a burger is something to be overlooked, the dollar may be too strong and doomed to fall. The Economist’s Big Mac Index, which compares the value of the ubiquitous burger around the world, shows that the dollar is overvalued against any currency. The dollar is the maximum valued, and a Big Mac is the cheapest for an American traveler, in Venezuela, Romania and Indonesia. The opposite is true in Switzerland, Norway and Uruguay.
(Reporting by Francesco Canepa, Mark John, Elizabeth Howcroft, Marc Jones and Karin Strohecker; editing by Alison Williams)