Paris September 6 (Lujia) The exchange rate of the euro against the US dollar continues to decline, but some other currencies perform much better. According to French BFMTV, the dollar has appreciated significantly compared with many other major currencies since the beginning of 2022, driven by its safe haven status and expectations of the Federal Reserve's tightening of monetary policy. USD index (DXY) has risen nearly 14% since the beginning of 2022. In the summer of 2022, the euro has fallen below parity against the US dollar. After Gazprom announced its complete closure of Nord Stream 1 gas pipeline on September 2, the euro fell again to $0.99 on the 5th, which has fallen to its lowest level in 20 years.
Amid the surge in electricity and gas prices, the euro is being punished by concerns about the European recession. UBS expects this trend to change, with the euro expected to drop to $0.96 in December and then staying below $1 until June 2023.
, in addition to rising 13.8% against the euro, the dollar rose 17% against the pound, Norwegian kroner, rose 13.8% against the yen, and 22% against the yen, with the yen falling to its lowest level in 24 years.
However, some other currencies are still flexible. Among emerging market currencies, the dollar's exchange rate against Brazilian real fell 5.9% and the exchange rate against Mexican peso fell 1.8%. UBS pointed out that the appreciation of Brazilian real and Mexican peso showed surprising resilience against the dollar, which may be due to the high interest rates of Brazilian and Mexico and the economic outlook are not as worrying as the United States.
Brazilian real benefited from the tightening of monetary policy of the Brazilian central bank . The Brazilian central bank is very proactive in fighting inflation. In August, the 12th consecutive rate hike of , and the policy interest rate has been raised to 13.75%. Brazil inflation is still at a high level, but is slowing, which also benefits the money market. In July, Brazil's annual inflation rate remained within 10%, and even declined month-on-month. The strong rise in oil prices also supported the Brazilian real, the eighth largest oil producer. The Mexican peso also benefited from the policy rate hike, with the central bank raising the policy rate to a record 8.5% two weeks ago, and the Mexican government adopted a cautious fiscal policy.
In addition to the currencies of emerging countries, the currencies of some developed countries have almost no loosening relative to the US dollar. The dollar has risen by only 4% against the Canadian dollar since the beginning of 2022. The Bank of Canada is very proactive and quickly raised its policy interest rate to 2.5% in mid-July. Canada's annual inflation rate remained at 7.6% in July, significantly lower than the 8.1% level in June. Moreover, Canada is the world's fourth largest oil producer, and rising oil prices have also increased the attractiveness of the currency. UBS said the Canadian dollar has obvious appreciation potential and is expected to be 1.24 CAD by June 2023.
Swiss franc also maintains its status. The dollar appreciated only 7.5% against the Swiss franc. In June, the Swiss National Bank decided not to intervene to prevent the Swiss franc from appreciation, as it is a bastion of inflation, which makes the prices of imported goods cheaper. Swiss inflation was also under control, with annual inflation rates of 3.4% in June and July, and the job market was stable, and Swiss exporters still performed well despite the appreciation of the Swiss franc.
USD also showed a relatively modest rise against the Australian dollar, up 6.7% since early January. Australia's economic environment is strong, with the International Monetary Fund expecting the country's economy to grow by 3.8% in 2022 and 2.2% in 2023.
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