The U.S. Dollar Index, which measures the value of American money against six major foreign currencies, has jumped nearly 12% this year to a two-decade high. The euro is now worth just under $1.02.
The dollar is climbing mainly because the Federal Reserve is raising interest rates more aggressively than central banks in other countries are in its effort to cool the hottest U.S. inflation in four decades. The Fed’s rate hikes cause yields on U.S. Treasurys to rise, which attracts investors seeking richer yields than they can get elsewhere in the world. This increased demand for dollar-denominated securities, in turn, boosts the dollar’s value.
Also contributing to the currency’s appeal, notes Rubeela Farooqi of High-Frequency Economics, is that despite concern about a potential recession in the United States, “the U.S. economy is on firmer footing compared to Europe.”
Not since July 15, 2002, has the euro been valued at less than one dollar. On that day, the euro blew past parity with the dollar as huge U.S. trade deficits and accounting scandals on Wall Street pulled down the U.S. currency.
This story is from the Techlife News #558 edition of Techlife News.
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