WIf you asked yourself a few weeks ago why the American currency is so important for the global economy, the foreign exchange markets recently gave you an impressive answer. The dollar has gained five cents against the euro since Russia invaded Ukraine. On the foreign exchange market, which calculates most of the time in the third or fourth decimal place, this is a more than clear price reaction. Investors are fleeing to the safe haven of the dollar. The currency’s leadership from the world’s largest economy was unchallenged before.
Now it has been strengthened even more by the war on the European continent. 60 percent of foreign exchange reserves are denominated in dollars. More than half of world trade is settled in the American currency.
The euro is currently in a difficult position on the foreign exchange markets. The Ukraine war is weighing on it, especially the economic sanctions against Russia. Because the European economies will suffer more than the United States. The fall in value adds to the already strong inflationary pressures. Higher import prices are now also contributing to inflation. But even more dangerous is the effect of soaring commodity prices, which are traded in dollars. The price increase is exacerbated by the fall in the euro exchange rate.