Why USD is so strong this year?
Most central banks implemented the ultra-loose monetary policy during the Coivd-19 Pandemic. Russia's invasion of Ukraine led to the energy and food crisis. The two main factors lead to high inflation this year and forced make central banks to change to tight monetary policy. Global investors are exchanging back U.S. dollars and avoiding risks.
U.S. Dollar appreciates against major global currencies
- Euro
Euro is worth less than the dollar for the first time in 20 years. The main factor is Russia's invasion of Ukraine. It pushed energy prices like natural gas prices to rocket high, and impacted European citizens' living costs in every aspect.
- Yen
Japanese Yen was the safe haven before. Japanese central bank insists on loose monetary policy aiming to achieve the targets of Abenomics while others do not. So this year it sinks to fresh 24-year low to the U.S. dollar.
- Chinese Yuan
Yuan slumps to near-two-year low as rate differential widens. Duo to the Zero-Covid policy, intermittent lockdown has weakened the domestic demand. This makes Yuan fall to the weakest level since September 2020. Yuan to 1 US dollar fall from 6.43 to 6.97, it's about 8%.
Effects of strong U.S. Dollar on sourcing from global suppliers outside America
U.S. buyers can benefit from the strong U.S. Dollar
As the top trade partner of the United States, China didn't implement a loose monetary policy in the past 2 years. After the shock of Russia's invasion of Ukraine, the inflation rate is not as high as other countries. The shipping cost is not insane like the situation in 2020. Buying cost from Chinese suppliers is becoming more competitive. You can purchase more goods at less cost. Importing from Chinese suppliers can make your product price more competitive while your competitors importing from other countries suffer high inflation costs.
