Russia-Ukraine war pushes the US dollar to pandemic levels

On Wednesday, the dollar hit its highest level since the early days of the pandemic and is on track to have its best month since 2015 as the Russian Ukraine war persists with no end in sight.

The US dollar index, which measures the greenback against a basket of six major currencies, hovered at 102.37, its highest level since March 2020. The dollar showed its bullish pace during the pandemic as investors sort a haven pushing the dollar index to a 5-year high of 102.82.

At the time of writing, the dollar index was trading at 102.22, up 0.99% within 5 trading days and 3% within the last month. The prospect of US rate hikes, as well as safe-haven flows fueled by weakening GDP in China and Europe, reinforces this shift.

What you should know

  • While the dollar index is up 3% this month and the euro, yuan and yen have slid as traders wager that rates are going up faster in the United States than in any other major economy.
  • Fears for energy security and Europe’s economy sent the euro down to $1.0635 in early trade, a five-year low after Russia’s Gazprom announced it will cut off gas supplies to Poland and Bulgaria later in the day.
  • The Bank of Japan meets on Wednesday and Thursday, and markets expect forecast revisions or perhaps policy tweaks to try to stem the yen’s recent slide.
  • In offshore trade, the Chinese yuan was under pressure at 6.5902 per dollar, down more than 3.5 percent for the month. After North Korea committed to expanding its nuclear weapons, the South Korean won plummeted to a two-year low.
  • Sterling hit a new 21-month low of $1.2560 on Wednesday, after falling more than 2% against the dollar this week as weak retail sales data triggered a rethink of Britain’s rate outlook.
  • Bitcoin sold overnight as investors dumped risky assets, and hovered near a six-week low at $38,228.

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