The dollar hit a two-decade high on Monday, as investors searched for safety and a yield in the face of growing concern about slowing global economic growth andhigh interest rates.
Rising inflation, the war in Ukraine, and the tightening of lockdowns against the outbreak of COVID-19 in Beijing and Shanghai have left investors in the dark, but they are sure that interest rates in the United States are rising.
The dollar index, which measures the greenback against six major currencies, is up about 9% this year, hitting its highest level since late 2002 on Monday at 104.090.
The Australian dollar, which is sensitive to growth by 1%, fell to $0.6999, its lowest level since February. The British pound and the New Zealand dollar reached their lowest levels in 22 months, while the euro and the yen were slightly above the recent major declines.
The dollar’s gains came against the decline in stock markets, rising 0.3% to its highest level since 2019 against the Swiss franc. It also rose 0.4% and near a two-decade high of 131.00 yen, and tested recent highs at $1.0508 per euro.
“Moves in US interest rates are not the only supportive of the dollar,” said strategists at NatWest Markets in a note.
“The downside risks to global growth from Ukraine and China are more urgent for Europe and Asia than for the United States, creating an atmosphere of 2018-style dollar exceptionalism,” they added.
China’s trade data showed imports were stable in April, and exports rose 3.9%. That was a little better than expected, but it didn’t help much to the yuan, which fell to an 18-month low of 6.7260 per dollar as closings tightened in Shanghai.
The yield on the benchmark 10-year US government bond rose strongly by 163 basis points this year, which supports the dollar’s rise with it.
The US Federal Reserve raised its benchmark interest rate by 50 basis points last week, and strong jobs data boosted bets for more big increases, with focus on inflation figures on Wednesday.
On the other hand, cryptocurrencies were hit by investors fleeing risky assets, with Bitcoin taking losses at the end of the week near its lowest level for the year at $33,500, while Ether, which is down 4% on Sunday, is at $2,440.