The US dollar fell and was last seen at 103.8500 against its peers. The red mark for the US Dollar Index masks the year-to-date percentage change (0.348%). Nonetheless, the U.S. dollar tumbled early, but investors are optimistic that the Federal Reserve could soon announce a pivotal update to the currency.
Investors are watching the movements of the US dollar to improve their foreign exchange portfolios. This also applies to traders who may risk losses due to cross-border transactions.
Factors potentially driving the U.S. dollar’s downward trend include money supply, government debt, and trade deficit.
Impact on financial markets
The Federal Reserve has been raising interest rates from 2022 to 2023. Interest rates remained stagnant for a while, but then inflation grew stronger and the Fed was forced to take unpopular measures. Experts believe those days are over. This means that the Federal Reserve has finished raising interest rates..
When interest rates were rising, it blocked a significant portion of capital and affected the market. That move was the lowest. Traders were unable to expand their portfolios, and high expenses resulted in reduced profits. Inflation further worsened the situation for both merchants and ordinary citizens.
Simply put, less capital could be converted into investment. Financial analysts believe the Federal Reserve cannot change course without raising interest rates any further. The fastest decline is expected to occur in May 2024. The previous projection was March 2024. The current situation has forced the authorities to reconsider before making the situation worse. dollar fall The lack of a sustainable economic environment to support development is impacting investment.
Doing business in the United States is not a bad idea. But investors want to avoid the possibility of their funds being blocked by waiting a few more months. While this situation unfolds, trading and investment-related activities are likely to divert to other countries and currencies.
Some factors potentially affecting the US dollar include:
- The Fed is likely to keep interest rates in check until at least March 2024. Any further increase will reduce investment. This increased the value of the US dollar.
- Considering that many countries are negotiating with their counterparts not to include USD as a medium of exchange, this is a dollar supply. For example, Russia and India are discussing trade between the ruble and INR. These developments are still ongoing and it is too early to comment on them.
As of mid-2023, nearly 23 countries have agreed not to use the U.S. dollar for trade at all. Getting rid of the dollar would harm its value, if not its reputation.
Another direction is heat It could also come from central banks in other countries deciding whether to raise it or not. their With or without a fee. The Swiss National Bank (SNB) may stop supporting the foreign exchange market for some time.
The market reaction is only evident in the decline of the US dollar.
- De-dollarization will be something new And investment will be a matter of only two countries in every way possible.
- Inflation will gain traction within the United States and expand to other parts of the world. A weaker dollar affects a region that relies heavily on exporting goods and services to the U.S. market, along with increasing imports.
- The stock market is likely to fall with similar sentiments. Traders can choose to withdraw instead of holding it for another year.
These losses can be converted into better returns through withdrawals, so you are less likely to retain your funds.
conclusion
The Federal Reserve concludes a two-day meeting on Wednesday. The report could come out soon. The US dollar is at 103.8500 against its peers. For reference, two additional trading pairs are Euro/Dollar at $1.0790 and Dollar/Yen at 145.5950. Documents have a global impact depending on how rates are processed in reports.