The dollar is getting stronger
Not that there was much doubt, but i numbers never lie: who stays earning from conflict between Russia And Ukraine it is not Europe, which has found a war within its borders 75 years after the last time. No, they are the United States, who have no problems of proximity to Kiev and who have been able to count on an increasingly strong dollar. So much so that the Dollar Indexwhich measures the value of the greenback against six foreign currencies, rose by 6.8% since the beginning of the year. Specifically, the following values have been found since January: 8.2% against the euro and the Swiss franc, 9.7% versus the pound and 13.1% against the Japanese yen.
There are no alternatives
We are in a scenario where the US dollar remains leader market with few alternatives for traders looking for safe havens: the Swiss franc is not the best option due to regular interventions by the Swiss National Bank (almost 4.2 billion francs have been busy in recent weeks to support the currency exchange rate). The JPY on the other hand, it is not a problem since the Bank of Japan has maintained an ultra-accommodative monetary policy,
Ruble increasingly weaker
That of the ruble is no longer a free market. Since Russia’s invasion of Ukraine, the Russian central bank has intervened heavily to support the national currency, introducing several measures to force local companies to sell their dollars and euros to buy rubles. “In view of this, the fact that energy companies like Eni are ready to make payments in rubles should have a big impact on the Russian currency – he explains Michele Sansone, Country Manager of iBanFirst in Italy -. The tight foreign exchange management implemented by the central bank will continue, in our view, in the short and medium term. The ruble is not evolving freely on the market FX. We can also ask ourselves if it is freely convertible“.
The future of sanctions
It is very unlikely that Europe oppose it by blocking the current accounts of companies making payments in rubles. There is a growing division among the leaders of the EU as regards the economic cost of war (in practice, higher inflation for all). “We know that Italy, but also the Germanyare reluctant to intensify the tensions that would squeeze the margins of European companies and the purchasing power of households – comment Samson -. We should expect that Europe steer clear of this problem by leaving it to member countries to decide, case for casewhat approach to adopt “.
The Brazilian real is growing
The brazilian real it could be one of the winning emerging currencies. We have entered a new super cycle of raw materialwhich means a long period of high prices resulting from various factors, such as the impact of green transition and years of underinvestment in fossil energy infrastructureto give some examples.
“That is will give support for the currencies of raw material – he adds Samson – in the long run, including the Brazilian real. The upcoming general elections of the October 2 should bring greater volatility. But the impact will be rather limited on the exchange rate of the real on average term, in our opinion. Neither Lula neither Bolsonaro they will abide by the Brazilian tax rule which limits the expenditure ceilings and requires that permanent increases from the expense mandatory are offset by provisions to increase revenue or reduce spending elsewhere. The investors foreigners are well aware of this and don’t seem worried at the moment. On the base of work of the Institute of International Financewe estimate that the fair value of the USD / BRL is around 4.50 (compared to 5.08 as of May 8, 2022) “.
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