Who Is the Current Winner of the War in Ukraine? America, and It Is the US Dollar That Tells Us So.
The impressive strength of the US dollar does not lie.
The strength of the US dollar is impressive. Records are falling day after day. Against the Euro of course, but also the British Pound or the Yen. This strength of the US dollar gives us an indication of the winner of the war in Ukraine so far: America!
One US dollar is worth 140.21 yen:
At the beginning of the war in Ukraine, a dollar was worth less than 115 yen.
One pound sterling is worth $1.15 today, while it was worth more than $1.35 when the war in Ukraine was started by Vladimir Putin on February 24, 2022:
To this you must add the Euro which is trying not to fall below $0.99 after being worth $1.20 in September 2021:
One could list many other currencies that are falling against the strength of the US dollar in 2022. In just one week, the dollar has risen nearly 5% against the British pound. Not seen since the Brexit referendum.
To explain this impressive strength of the dollar in 2022, there is a classic explanation. Economists will point you to their explanation of interest rate differentials. The Fed has raised rates faster and higher than most central banks. And as Jerome Powell said in Jackson Hole at the end of August 2022, the Fed will continue to do so.
Investing in US dollars today makes money, more money than investing in euros or yen. The alternative is there for investors.
The second explanation from economists will focus on the growth differential. US growth has declined for two consecutive quarters in 2022, but it is still solid, unlike the growth of the Eurozone, crushed by the price of gas, the growth of a British economy in disarray, or a Japan that is trying to rebound.
And there is also, and above all, a differential in growth prospects, as the American outlook is better than that of the other economic powers.
But that's not all.
This rise in the US dollar is an expression of investors' verdict on the war in Ukraine. And for them, it is clear that America is already the big winner in this war in Ukraine. When an investor is going to look to put his money in a country that ticks all the boxes, he is going to invest in America.
What boxes am I talking about?
The boxes that allow you to say that a country is a great world power, totally independent:
Energy independence.
Independence and military power.
Geopolitical dominance.
Solid foundations for growth.
...
And the list could go on and on.
Final Thoughts
You will tell me that inflation was still at 8.6% in July 2022 in America. And you are right! America is not spared from inflation. The US economy will continue to slow down due to inflation and rapidly rising short-term interest rates.
However, for investors, it is clear that America is currently “The place to be”. And the dollar is the ticket. The strength of the US dollar does not lie: America is for the moment the big winner in this war in Ukraine.
Some reading
In the Wake of the Fed, the ECB Is Bound to Have a Heavy Hand in Raising Rates. A 75 basis point increase is more than likely on September 8.
Bottom or Not Bottom for Bitcoin? Here Are Some Thoughts on the Matter. Looking where you need to will help you see more clearly.
Rather Than the End of Abundance, It Is Sustainable Abundance That We Must Aim for. Emmanuel Macron is wrong.
An American Student Trader Pockets $110M in One Month and Becomes the New Prince of Wall Street. Lucky guy or genius?
Cold War Between America and China — The New Space Race. The war in Ukraine started by Putin also upsets the balance in space.