'Surge In The US Dollar May Continue Given Global Economic Uncertainties': Says Emkay Wealth Management

The US Dollar index has reached 104.66, gaining by 0.15% at 2:24 am EDT, till Jun 29, 2022. The US currency is thriving now compared to other currencies due to global turmoil. Additionally, the outflow of funds, government finances, and crude prices determine INR performance, Emkay Wealth Management Ltd. thinks.

According to a recent report by the wealth management house, "The Dollar index was near 104-105 levels on May 12, 2022, and thereafter, it pulled back to 102 levels later in the month. But the index surged thereafter touching 104.28 by June 20, 2022. The movement in the Dollar Index demonstrates the strength of the US unit and the likely trajectory in the coming months."

The major economies globally are struggling with the high inflationary pressures, after the pandemic. The UK and the US are dealing with 30-40 years high inflation rates. The economic growth rates are falling sharply. Although the ECB has already announced its desire to bring in rate action, nothing concrete has been materialized yet. The report says that the worst loss against the US Dollar was witnessed in Japanese Yen, which was rattled by low-interest rates, a low rate of growth, and a not-so-buoyant local demand. The currency may lose more ground as growth concerns escalate and as demand remains subdued. The Yuan is weaker compared to its position about six months back. So, it "Brings to the fore the safe-haven status of the US Dollar in the face of uncertainties. What has added to this positive sentiment is the emphatic action on interest rates from the Fed which instilled confidence in the markets that the inflation combatting mode will bring to a halt the price rise faster than expected," Emkay Wealth Management commented.

The resurgence of the Covid virus is another fear in the world now. The lockdown in the important provinces, and the impact of the domestic conditions on trade, also pulled down the Indian currency. Recently the Indian stock markets have performed weak, the FIIs were pulling out funds from the equity markets. The high inflation rate, rising crude prices, and the deteriorating trade balance coupled with a strong US Dollar index have also impacted. Emkay Wealth Management added, "The Indian government's finances may also be a matter of concern for overseas investors given the rising expenditure which may lead to dependence on the markets for additional resources."