Why is $ increasing
I noticed that many people have a wrong idea about the principles of the functioning of the world economy in general, and the monetary system in particular. I want to shed light on this question.
A bit of history.
Well, a lot has been said about the Bretton Woods system. Therefore, I will not go into details, I will tell you briefly. The Bretton Woods system was adopted by the Allied countries in the Second World War, and its essence was as follows: the dollar is a world currency. The dollar is secured with gold. All other currencies are provided by the dollar.
This system existed until the mid-seventies, when the value of the currency was determined on the basis of market mechanisms, on the principles of free conversion (SLE - an abbreviation familiar to the ninetieth nineties each)
Since then, in fact, currencies have become a common commodity, the price of which is determined by the balance of supply and demand.
')
Some statistics
According to the data of this website, you can get the following picture of the dynamics of the dollar exchange rate change against other currencies, for the last 4 months (we are capturing the beginning of the crisis):
Dollar / Euro
_____________________
Dollar / Pound
_____________________
Dollar / Brazilian Real
_____________________
Dollar / Indian Rupee
_____________________
As can be seen, the dollar is rising to all of these currencies. And only in relation to the Yen, the dollar is constantly decreasing:
Dollar / Jena
_____________________
The main dynamics is clear. Despite the global crisis in the United States, the currency of this country is growing relative to most other world currencies.
So why is the dollar rising?
It is wrong to say that the level of the country's economy does not affect the exchange rate of this country. It affects how. Only now, not directly, but indirectly. The law says that the amount of money must correspond to the amount of goods that can be bought with this money has changed a little. Now the amount of goods that can be bought on the same money is not constant, and depends on the exchange rate. And the course is determined on the stock exchange. And the economy of the country, the issuer, affects the rate indirectly, along with a number of other factors.
It would seem that in the USA there is a crisis, unemployment, bankruptcies, a huge budget deficit, and the dollar has been growing over the past three months, just in time for the crisis, relative to most currencies. Paradox? No, if you understand the reasons for this growth.
Yes, the US economy is falling, and this fall affects the exchange rate. If, under the same conditions, the US economy still grew, the dollar would soar to the skies. But in addition to the economy, there are other factors, and the most important of them are now 2:
1. The economies of all other countries whose currencies are traded on the stock exchanges also fall.
2. The price of oil is falling.
As we have said, the price of hard currency is determined on the basis of the balance of supply and demand. If the price of a currency rises, then there is demand for it. Due to the crisis, oil consumption in the USA and the world has decreased, which led to a drop in oil prices. In the past few years, oil has been an interesting investment. It invariably and very quickly grew in price, which attracted investors. But due to the reduction in oil consumption in the United States, the price of it began to fall and investments in it were not so interesting. By that time, the dollar had already fallen quite strongly (it was falling steadily last year), and immediately attracted the attention of investors. The dollar is a commodity, and once oil has become less attractive, they began to buy dollars. And why not the euro? And what's the difference if the US economy and the economy of Europe falls? But the euro is a young currency, and there is a century of confidence in the dollar, the US economy, despite the fall, remains strongest in the world, and the huge external debt of the states ensures that lenders break into a cake, but will not let the states go bankrupt. The demand for the dollar has risen, and the price of this currency is growing.
What's next?
And the dog knows him! No one can predict with sufficient accuracy what will happen to the price of a dollar in the medium term, because it depends on many factors. It is clear that the price of oil will not be able to fall forever, it is clear that OPEC will do everything that oil would increase in price, and then oil will again become an interesting commodity, and the demand for it will rise, and the demand for the dollar will fall. Probably be so. Yes, and the States themselves expensive dollar unprofitable, and he will do something to lower it.
But all this is only speculation, and time will tell what will happen in reality.
A bit of history.
Well, a lot has been said about the Bretton Woods system. Therefore, I will not go into details, I will tell you briefly. The Bretton Woods system was adopted by the Allied countries in the Second World War, and its essence was as follows: the dollar is a world currency. The dollar is secured with gold. All other currencies are provided by the dollar.
This system existed until the mid-seventies, when the value of the currency was determined on the basis of market mechanisms, on the principles of free conversion (SLE - an abbreviation familiar to the ninetieth nineties each)
Since then, in fact, currencies have become a common commodity, the price of which is determined by the balance of supply and demand.
')
Some statistics
According to the data of this website, you can get the following picture of the dynamics of the dollar exchange rate change against other currencies, for the last 4 months (we are capturing the beginning of the crisis):
Dollar / Euro
_____________________
Dollar / Pound
_____________________
Dollar / Brazilian Real
_____________________
Dollar / Indian Rupee
_____________________
As can be seen, the dollar is rising to all of these currencies. And only in relation to the Yen, the dollar is constantly decreasing:
Dollar / Jena
_____________________
The main dynamics is clear. Despite the global crisis in the United States, the currency of this country is growing relative to most other world currencies.
So why is the dollar rising?
It is wrong to say that the level of the country's economy does not affect the exchange rate of this country. It affects how. Only now, not directly, but indirectly. The law says that the amount of money must correspond to the amount of goods that can be bought with this money has changed a little. Now the amount of goods that can be bought on the same money is not constant, and depends on the exchange rate. And the course is determined on the stock exchange. And the economy of the country, the issuer, affects the rate indirectly, along with a number of other factors.
It would seem that in the USA there is a crisis, unemployment, bankruptcies, a huge budget deficit, and the dollar has been growing over the past three months, just in time for the crisis, relative to most currencies. Paradox? No, if you understand the reasons for this growth.
Yes, the US economy is falling, and this fall affects the exchange rate. If, under the same conditions, the US economy still grew, the dollar would soar to the skies. But in addition to the economy, there are other factors, and the most important of them are now 2:
1. The economies of all other countries whose currencies are traded on the stock exchanges also fall.
2. The price of oil is falling.
As we have said, the price of hard currency is determined on the basis of the balance of supply and demand. If the price of a currency rises, then there is demand for it. Due to the crisis, oil consumption in the USA and the world has decreased, which led to a drop in oil prices. In the past few years, oil has been an interesting investment. It invariably and very quickly grew in price, which attracted investors. But due to the reduction in oil consumption in the United States, the price of it began to fall and investments in it were not so interesting. By that time, the dollar had already fallen quite strongly (it was falling steadily last year), and immediately attracted the attention of investors. The dollar is a commodity, and once oil has become less attractive, they began to buy dollars. And why not the euro? And what's the difference if the US economy and the economy of Europe falls? But the euro is a young currency, and there is a century of confidence in the dollar, the US economy, despite the fall, remains strongest in the world, and the huge external debt of the states ensures that lenders break into a cake, but will not let the states go bankrupt. The demand for the dollar has risen, and the price of this currency is growing.
What's next?
And the dog knows him! No one can predict with sufficient accuracy what will happen to the price of a dollar in the medium term, because it depends on many factors. It is clear that the price of oil will not be able to fall forever, it is clear that OPEC will do everything that oil would increase in price, and then oil will again become an interesting commodity, and the demand for it will rise, and the demand for the dollar will fall. Probably be so. Yes, and the States themselves expensive dollar unprofitable, and he will do something to lower it.
But all this is only speculation, and time will tell what will happen in reality.
Source: https://habr.com/ru/post/46513/
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