The strong US currency could help the US Federal Reserve in its fight against inflation. For European investors, dollar strength is a double-edged sword. It is by no means certain that the dollar will continue to appreciate.
New York. Stockbrokers are increasingly using the word “parity”. This expression has a magical effect in the interplay between the world currencies euro and dollar. Money acrobats speak of parity when the common currency and the greenback have the same value, i.e. an exchange rate of 1:1. The special thing about it: For almost 20 years, the euro has always been worth more than the dollar, so breaking parity would be a medium-sized sensation in the midst of the sell-off on the stock markets.
The US dollar has been rising for months. One euro was last worth $1.05. At the beginning of the year it was $1.14, a year ago it was $1.22. Not insignificant is the euro loss of inactivity European Central Bank (ECB) owed. Inflation is going through the roof, but the currency watchdogs are still refusing to raise the key interest rate for the time being. According to the textbook, higher interest rates strengthen the currency because investors are more likely to invest their money in these same markets. The US Federal Reserve has raised the key interest rate to a range of 0.75 to 1.0 percent and announced further rapid interest rate hikes.
Of course, it is not only the reluctance of the ECB that is contributing to the course shift. The dollar is considered a safe haven in times of crisis, and the greenback has appreciated against almost all currencies.