For those who are into the forex markets, they would know how much fluctuation the US dollar has experienced in the recent months.
It has been a competition between the USD and the rest of the major currencies, even including the basket of six major currencies.
At times, it is the USD that has edged higher versus the rest of the currencies and at times, it is the other way around.
This is because of the constant change of mind among the investors due to the economic condition in the United States and the rest of the world.
The recent volatility in the trading price of the USD had managed to confuse the forex investors who are not much experienced.
However, the expert forex traders know exactly what is causing the USD price to fluctuate too much. If you are also among the majority of the traders with not much knowledge about the USD volatility, it is your opportunity to get enlightened.
You will know exactly what is causing the dollar price to go up and go down. You will also get to know what to expect from the USD in near future.
Why is the USD Price going up?
Like the rest of the world, the United States has also taken a hit to its economy. It is due to the rising inflation rates and the constant supply chain disruptions due to the pandemic’s aftermath.
However, the difference between the United States and the rest of the world is that it not only has the largest/top economy in the world, it also has the dollar.
The USD is the largest global reserve country so the vast majority of the international trades are being done in the USD.
Therefore, a slight change in the dollar price can result in huge profits for one party and huge losses for the other.
As the year 2022 began, a constant rise was being recorded in the US inflation rates. The US Feds was closely monitoring the situation and as the inflation rates rose to a warning level, it was time to come up with a contingency plan.
For the Feds, the best solution was the implementation of interest rate hikes. The Feds announced that they would aggressive hike the interest rates to see if the inflation rates come under control.
It was from June 2022 that the US Feds started implementing 75 bps interest rate hikes on a monthly basis. As a result, the value of the USD started to rise significantly against the rest of the currencies.
Even at the time of writing, the same policy is in play, which reflects in today’s forex trading session. According to the forex trading news, the DXY is up 0.26% against the basket of six major currencies.
As of now, the value of the dollar versus the six major currencies is 106.97. The hawkish comments were recently shared by the US Feds revealing that they would continue increasing the interest rates.
This means that the price of the dollar may continue rising in near future and it may not weaken until the Feds stop the interest rate hikes.
When Will the USD Price go down?
In the past couple of months, the US inflation rates have started to weaken.
It suggests that the policy adopted by the US Feds is finally bringing in results. As the policy succeeds, the Feds may start lowering the rate hikes.
When that happens, the value of the USD would start weakening against the rest of the currencies.
However, this does not mean that the USD would continue weakening. As the Feds loosen the rate hikes, the dollar would start gaining its natural strength after a short downtrend.
Therefore, the investors must not lose their confidence in the USD as things may work out in the greenback’s favor in the long run. Even every major and recommended forex broker is suggesting that the investors must do the same.