The collapse of the sterling disrupts the political scene in Britain (Getty)
Confuse the strong dollar world currenciesAnd pressure on different economies, especially with the flight of money towards the American markets. The World Economic Forum believes that the strength of the dollar has harmed most currencies and investors in the financial markets, except for the American tourist, who is now touring Europe and the countries of the world at the lowest prices.
Until now dollar rose By more than 10% in 2022 relative to other major currencies – near a two-decade high – as investors worried regarding a global recession scrambled to cash in on the safe-haven dollars in turbulent times.
What increases the dollar’s attractiveness is that the Federal Reserve continues to raise interest rates to tackle high inflation. This has made US investments more attractive, as they now offer higher returns.
Investors worried regarding a global recession scrambled to cash in on dollars, which are considered a safe haven in turbulent times.
According to the World Economic Forum, “US travelers rejoice that a night in Rome once cost them $100 and now costs regarding $80, but the rising dollar presents a more complex picture for multinational corporations and foreign governments.”
In terms of global trade, regarding half of whose bills are issued in dollars, the high US currency has confused companies and industry that pay import bills in dollars, as well as for developing countries that need to pay their debts in dollars.
The volatility in the US stock and bond markets, due to the rise in interest on the dollar, led to crises in the global exchange rates, as the dollar rose in large proportions once morest the emerging currencies, except for the currencies of Latin America, which managed to escape from the “dollar massacre”.
Morgan Stanley believes that the dollar’s continued appreciation will lead to central banks trying to manage sovereign borrowing costs more effectively.
In Japan, where the yen has fallen to its lowest level in 20 years, fears have been raised in Tokyo that the Japanese fortunes that have accumulated for decades are fleeing from the Land of the Rising Sun to the United States. This is despite the fact that Japan is one of the countries benefiting from a weak currency in the growth of exports.
The euro fell due to the delay of the European Central Bank in tightening monetary policy and raising interest rates, which it considered inevitable
In Europe, the euro fell to less than one dollar. The European Central Bank implemented a policy of raising interest rates recently in an attempt to save the currency from collapse and to confront inflation that negatively affects the currency.
The euro fell due to the delay of the European Central Bank in tightening monetary policy and raising interest rates, which it saw as inevitable.
As for the Chinese yuan, the implementation of the new Corona virus non-proliferation policies weakened the expectations of economic recovery, and prompted the Chinese Central Bank to ease policy, causing the yuan to depreciate.
In terms of the British currency, the British Economic Help website sees that the possibility of Britain entering an economic recession is almost certain.
“If the UK enters a recession, UK interest rates are expected to fall compared to other countries,” he says. This would make the UK less attractive to investors, and hot money flows would leave the London Stock Exchange and move to countries with higher interest rates.
There are fears over the sterling exchange rate if investors flee Britain
Thus, there are concerns regarding the sterling exchange rate if investors flee from Britain, because this means massive sales of the pound and the purchase of other currencies, which may cause the value of the pound to fall.
But an economic stagnation will lead to a rise in the public debt-to-GDP ratio, and this may cause investors to worry regarding countries’ ability to service bonds, especially in the eurozone, which is suffering from a range of political crises.
