HomeFinancesHistoryOnline IncomeWebsite TricksWhy is the value of the US dollar increasing day by day!

2 months ago (12/10/22) 1676 Views

Why is the value of the US dollar increasing day by day!

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Why is the value of the US dollar increasing day by day?

After the Ukraine-Russia war, the world economy has become very unstable. Inflation has increased in the country due to the abnormal increase in the prices of raw materials, energy and agricultural products. There is a fear of economic recession in developed countries. This is affecting the exchange rate of different countries and the value of the currency is decreasing in the country. But the only exception is the US dollar. The price of the dollar is increasing in this turbulent state of the world economy. Bangladeshi currency is not out. Suddenly, the price of the dollar has increased against the rupee in both the commercial banks and the open market of the country. The difference in the inter-bank and open market dollar exchange rates is currently around 9.5 rupees. Which was never seen in Bangladesh in the past. Why is the world only increasing the price of the dollar? And the price of currency of other countries including money is falling? And why the country’s currency market instability in the price of the dollar? This is the scenario this time.

The most easily tradable commodity is the US dollar
The dollar is one of the most printed currencies in the world. So one of the most reliable resources in terms of anything. The value of the dollar is much more stable than any other currency, gold or stock that rises or falls in value. The dollar is widely used to trade other countries’ currencies and goods around the world. Their trading market is therefore quite organized. Almost everyone in the world can buy and sell dollars and transactions are done in dollars in international markets. This is why the dollar dominates more than any other country’s currency.

Reasons for the dollar to depreciate against any currency
If a country’s import expenditure increases in the international market, while export income and repatriation income decrease in comparison to import expenditure, the value of the dollar increases against that country’s currency. In addition, if the central reserve of a country decreases, the demand for dollars continues to increase more than usual, and if there is a shortage of supply, the price of the dollar increases against the country’s currency. There are some other reasons. Which affects the increase in the value of the dollar. For example, if a country’s citizens take cash dollars abroad for treatment, education or as tourists compared to cash dollars coming from their own citizens and foreign tourists, it has an effect on the value of the dollar against the country’s currency. A country’s currency may depreciate even if banks sell dollars at higher prices to importers and lower prices to exporters depending on global demand. If the opposite happens, the dollar will depreciate against that country’s currency.

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The US dollar is the biggest tool, not the weapon
On December 17, 1971, the finance ministers and central bank governors of ten industrialized countries met in an important meeting at the Smithsonian Institute in Washington, USA. The objective of the meeting was to reach an agreement on the currency exchange regime between them. It was a time of economic crisis. Under an economic system called Bretton Woods, the policy of not unilaterally devaluing the currency was followed by Western countries for a long time to overcome the economic crisis. The then US President Nixon wanted to get out of it. So on August 15, 1971, he unilaterally withdrew from the Bretton Woods system. This incident created a commotion in the western world. This event is still remembered in the world of economics as the Nixon shock. Immediately after this, the finance ministers of the western industrialized countries sat in a meeting with the Nixon administration. However, any results did not bring by the meeting. As a result, Nixon stuck to his decision. The Bretton Woods system collapsed. But one quote from that meeting is still famous. When other Treasury ministers protested the unilateral devaluation of the dollar, Nixon administration secretary of state John Connally famously said “It’s our currency but your problem.” Since then, the biggest weapon of the United States in trade competition has been the dollar. As in the 70s, when almost the whole world was in economic crisis, the monopoly of the dollar gave the United States the opportunity to use this weapon again. And the rest of the world is in danger with the use of these weapons.

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Ukraine war boon for dollar
Since 2020, the economic crisis of the whole world has started in the face of Covid infection. When the infection subsides by the end of 2021, the economy begins to recover. However, as production and supply systems were disrupted during the pandemic, inflationary pressures increased. The Russia-Ukraine war, amid economic recovery, deepens the economic crisis caused by Covid. The Ukraine war is a nightmare for Europe, which is particularly dependent on Russia for energy. On the other hand, China’s economic recovery efforts are also hampered by the side effects of Xi Jinping’s strict zero-covid policy to prevent corona. The economic shocks of China and Europe have an impact on other countries of the world as well. But the US is the only good in this economic situation. The Ukraine war has not caused them any problems but has brought blessings to their arms trade and energy sector. Their major energy and arms companies made record profits after the start of the war.

Federal Reserve interest rate hikes also boosted the dollar
In the United States, the only concern was inflation. And to keep this inflation under control, the central monetary authority of the United States, the Federal Reserve Bank, has once again used its expensive weapon, the dollar. Recently, the Federal Reserve Bank has raised interest rates. Which is highest in last three decades. The Federal Reserve’s decision to raise interest rates boosted the dollar overnight.

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The destination of age capital is now the United States
While Europe is on demand, China is passive and Russia is under sanctions, the US economy is currently the only stable economy in the world. Investing in the US is now profitable due to the increase in interest rates on it. As a result, the dollar and investment in the United States is now a profitable means of investment for the world’s big capitalists. Dollars are pouring into the country from all over the world. Investments are increasing in US stocks and bonds.

The world’s economic uncertainty is affecting the increase in the price of the dollar
First the Covid infection, then the Russia-Ukraine war. The world economy is currently in a precarious situation. As a result, investors do not want to go for long-term risky investments. The safest investment in such times of crisis is gold or US dollars. But the supply of gold in the world is limited and gold trading is also somewhat risky. So investors are leaning towards the US dollar.

Dollar highest in 20 years
Due to the war, on the one hand, the import price of almost all products in the world market has increased, and interest rates have increased, and the United States is entering the United States as a safe investment destination from other countries. Due to the effect of these two, almost all countries are forced to devalue their currency. So the value of the dollar is now the highest it has been in the last 20 years. According to the US dollar index, the Japanese yen fell 11.7% against the dollar, the British pound and the euro fell 7.5%, the Swiss franc fell 9.6% and the Chinese yuan depreciated 3.5%. Bangladesh is not outside of this. All of a sudden, the rupee has been depreciating against the dollar for the past few months. Simply put, the value of money has decreased against the dollar.

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