Скачать с ютуб Why Is USD Rising? (And GBP & JPY Falling?) в хорошем качестве

Why Is USD Rising? (And GBP & JPY Falling?)

In this video, we discuss why the USD's value has been increasing while other currencies like the GPB and JPY have been declining. Over the last few quarters, the USD has been extremely strong. The $DXY is an index that tracks the USD against a basket of other foreign currencies, and its currently up 17.5% this year, outperforming many other asset classes. This is ironic because the US is going through such high inflation which technically means their currency should be worth less, but the USD has just blew away all other currencies in the last 1 year. So why is this happening? 1. Hawkish Fed The first clear reason that the USD is strong is because the U.S Federal Reserve has been extremely hawkish. The Fed has gone crazy with hiking interest rates in the US this year - at the end of 2021, the fed rate was ranging around 0.1%-0.15% With all the hikes in 2022, we’re already at the 3-3.25% mark and its expected that we’ll reach the 4% mark by the end of the year. We know this caused our investments in stocks and crypto to tank, but why is this making the USD go up? When interest rates are high, US treasuries also pay this higher rate to investors. Since the US is a global powerhouse and investors around the world look there for investments, there has been a significant inflow of money. Investors have taken out their cash from foreign investments and put it into US bonds. To do so, they’ve had to sell their foreign currency to get USD and purchase these assets. If we can get 4% on US bonds that is backed by the government, then why take the risk of putting it in other less stable countries or even more riskier investments like stocks? For example if you buy a 2 year treasury yield now, you’ll get a coupon payment of 4.25% per annum which is a good return. So what do investors do? They sell out of riskier and more volatile assets like stocks and also move their investments in other countries to the US. This lead to the drop in prices for stocks and the higher USD. Although this can’t be measured, its probably the biggest factor contributing to the USD price increase. 2. Instability in other countries To add on to this, other developed countries with supposedly stable economies are faring much worse off than the US. Europe is having a major energy crisis and is probably already going through a recession. Most other countries have also been a lot slower to increasing interest rates, with some of them still refusing to do so... more on that later. Also, in times where things are shaky and investors get spooked they tend to revert to cash and specifically the USD as they see it as a safe way to store their wealth. Despite what we say about gold, bitcoin, stocks, and bonds, the USD is still undoubtedly the first place investors look to when things go south. However, there is one country that is doing relatively well against the USD which is our neighboring Singapore. Over the last 1 year, the SGD has only lost about 6% to the USD compared to well over 15% for other currencies. A big reason for this is that the MAS which is the equivalent of the FED in the US has also been very aggressive in initiating rate hikes. This seemed to be the key for them as countries essentially had to match what the US was doing for their currencies to keep pace. WHY THE GPB IS FALLING? Europe is facing an energy crisis so that’s already pretty bad for them. However, things got even worse when their new government introduced the mini-budget. Immediately after this announcement, the GBP reached a low of $1.03 with a 5% drop which is the lowest since 1971. Their mini-budget was meant to stimulate the economy through quantitative easing or also known as pumping more money into the markets. This is what everyone was doing back in 2020, but times have changed and inflation is high so everyone needs to start cutting back. For some reason, the UK thinks that they can get away with this while investors don't which caused the drop in the GBP. WHY IS JPY FALLING? In the case of Japan, their currency dropped so hard against the USD that the Japanese central bank had to step in and directly intervene in forex markets. When I say directly intervene, they actually sold their USD reserves to buy JPY and support their currency. According to Nikkei Asia, the Japanese government likely spent $21bn of their USD reserves to save the JPY which was in free fall. Most of the blame from economists is that Japan is refusing to hike rates... Hey! Thanks for reading the description. We can't fit everything in here so watch the whole video to find out more! Follow us on Instagram:   / themillennialfinance_   Tell us in the comments if you liked this video and what other kinds of videos you would like to see. Disclaimers: https://themillennialfinance.com/disc... Music: Bensound.com #TheMillennialFinance