As worries about the global economy continue to rock markets, the demand for the dollar has surged.
The demand for the dollar comes as several central banks around the world have announced a measure to increase liquidity. However, despite the banks’ efforts, the dollar remained in high demand.
Manuel Oliveri, a currency strategist at Credit Agricole, said that the dollar is still the “favoured currency across the board.”
“Central banks are stepping up their liquidity actions, but it is not enough to make sure the dollar scarcity disappears, and as a result, the dollar continues to be the favoured currency across the board.”
As demand for the dollar rose, the U.S. Federal Reserve said it would set up swap lines with nine countries to help ensure they have access to the dollar and “help lessen strains in global U.S. dollar funding.”
“These facilities… are designed to help lessen strains in global U.S. dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses both domestically and abroad.”
Amid the uncertainty in the markets, investors were fleeing stocks and turning to the dollar.
As Reuters notes, the surge in demand for the dollar has left analysts scratching their heads. Typically, when there is uncertainty in the economy, investors rush to precious metals.
The dollar was trading at its highest level over other currencies since 2017. It has also seen its largest rise since 1992, “on an eight-day rolling basis,” Reuters reports. Meanwhile, other currencies have plunged to levels not seen in decades.
While the strengthening dollar means that it can buy more overseas, and it could make travel cheaper. It also means that U.S. goods tend to be more expensive overseas, and some have said it could lead to a loss in jobs.
