U.S. dollar gains strength while euro falls
On Monday, the U.S. dollar strengthened, and the Euro fell into parity against the greenback.
The dollar gained 0.8 percent against the Euro, reaching 109.2. The Euro dropped 1.1 percent to 0.9928.
It was the dollar's most vital position in five consecutive weeks. The Euro saw parity with the U.S. currency for only the second time in two decades.
It happened last year in mid-July when the dollar hit a two-decade high at 109.29. The Euro dropped to its lowest point within the same period.
This was because investors stayed away from riskier assets due to the possibility of interest rate increases by the U.S. or European governments.
However, the Federal Reserve supported the U.S. currency, which promised an aggressive monetary regulation before the Fed's symposium this week in Jackson Hole, Wyoming.
Thomas Barkin, Fed president of Richmond, stated last week that federal officials aimed to impose quicker front-loaded interest rate increases.
Reporters were told by Michael Brown, London's Caxton, that the statement was a reality check that did not take any risks.
Brown stated that investors expect a relatively hawkish message Friday from Fed Chair (Jerome) Powell in Jackson Hole.
"It's the perfect combination of risk-aversion, a hawkish Fed, for the greenback not to go higher, especially as growth worries continue to mount, especially in Europe."
However, the Euro's collapse was due to Gazprom's announcement of a three-day halt in gas supply via the Nord Stream 1 pipeline at August's end. This pipeline supplies gas to western Europe regularly. This announcement raised fears of an energy crisis, contributing to the Euro's instability over the last few months.
Joachim Nagel (German Bundesbank President) believes that the European Central Bank (ECB) should raise interest rates because inflation will continue to be high throughout the year.
Brown explained that the "pivotal" level for the Euro was 0.9950, as it was previously the lowest point for the currency. The Euro could suffer "significant further losses" if the value falls below this point. The situation will worsen if the ECB doesn't tighten monetary regulation quickly.
Other currencies falling
Other currencies also fell on Monday, including the Renminbi Yuan of China, which reached its lowest point in almost two years. At 6.869, the U.S. dollar was 0.54 percent stronger than its yuan counterpart.
The Chinese central bank made a significant move to reduce benchmark and mortgage reference rates. Yuan's fall was in line with this. This was done to help the country recover from the property crisis and COVID-19 cases that recurred.
On Monday, the British pound sterling fell by 0.64 percent to 1.17565. This was its lowest point since mid-July.
This was due to an increase in energy prices and a labor shortage across the country. This led to a rise in living costs and fears of an economic slowdown.
The current economic environment also had an impact on the crypto market. Bitcoin fell 2.52 percent to $20,972 Monday.
What causes the US dollar to strengthen??
If the demand for the dollar increases, its value also increases. Conversely, if the demand decreases, the value also decreases. The demand for dollars increases when international parties, such as foreign citizens, foreign central banks, or foreign financial institutions, demand more dollars.
What happens if the US dollar collapses?
A weak dollar means the deficit won't cost the government much to repay. Creditors have changed their assets into other currencies over time to stem their losses. Many fear this will turn into a race for the dollar. This will quickly erode the value of your investments in the United States and increase inflation.
How to Survive a Currency Collapse
1)Invest in hard goods: Fine art, antiques, classic cars and other rare items hold value through time in any stable currency that emerges. 2)Buy assets that are income producing. 3)Invest in gold and silver.