The American financial advisory company Bloomberg assured that this week andhe dollar has reached record highs once morest other currencies such as the euro or the yen, which might mark the beginning of “a vicious circle for the global economy.”
The US currency occupies a special place in international markets. When uncertainty grows in the global economy, investors often seek refuge in dollar-denominated assets, strengthening the US currency once morest the others. This was the cause of the appreciation of the dollar in March 2020, despite the collapse of international markets, and it is the reason why it is growing right now.
The vast majority of cross-border trade is still denominated in dollars, so the appreciation of this currency has historically translated into a severe blow to the world economy.
In the face of higher than expected inflation and still high commodity prices, concerns have been raised that the global economy is entering an unprecedented ‘loop of doom’; an economic phenomenon in which every decision taken to break a bad cycle only serves to reinforce it.
Jon Turek, founder of hedge fund consultancy JST Advisors, points out that the record pace at which the US Federal Reserve is raising key interest rates reduces the chances of the world leaving this cycle in the next few years. next months.
“We have the European problem, which creates pressure on the euro, which makes the dollar rise, which worsens the manufacturing cycle, which rescinds all this once more,” explained the expert.
Bloomberg highlights that although there have already been periods of notable dollar strength, such as in 2016 or 2018, in which the currency strengthened when the Reserve tried to tighten its policy and stopped once the institution intervened, in the current context the financial authorities have much less room to maneuver to reverse course. This following the Consumer Price Index stood at 9.1% in June, a level not seen in 40 years.
