Global financial assets are being affected by fears of a Russian attack on Ukraine and a war breaking out. Although the government of Vladimir Putin announced the withdrawal of troops near the neighboring country, the government of The United States affirms that it does not observe a withdrawal and that the Russian attack is imminent.
Given this context, the question arises about what would happen to the value of the US dollar in case these tensions end in a warlike conflict. Above all, considering that the United States would have a direct participation in the eventual confrontation.
Economists point out that, at least in the short term, the value of the US currency should strengthen against the euro and against several major currencies. But in relation to some other currencies, assets and commoditieswhich would take more strength in this context, could be weakened.
Milagros Suardi, economist at EcoGo, pointed out that immediately, in case of a conflict, the dollar should take more value. In an international event of this magnitude, the currency of that country should be sensitive (be affected) and, in the face of greater demand, its price would increase, although not against all references.
“Not against oil, which would jump higher than the dollar, with higher oil and gas prices. But yes against the euro. With Russia being the main supplier of gas to Western Europe, a conflict could be expected to end up spilling over into Europe’s economy, leading to a weakening of the euro,” Suardi said.
Along similar lines, Andrés Borenstein, an economist at Econviews, estimated that a war would affect the economic activity of the old continent due to the possible lower supply of gas in that area, so the value of the euro would lose strength. Based on this, and compared to this currency, the dollar would strengthen.
“Generally, at events like these, safe haven currencies can be the yen or the Swiss franc. Obviously, gold should also rise against the dollar. Against the rest of the currencies, the dollar should strengthen because there would be an outflow of funds from risky assets (mainly emerging) and refuge in US Treasury bonds”said Pablo Repetto, director of GRA.
In this way, according to the economist, the US currency could have a deterioration in its value compared to other currencies, such as the yen and the Swiss franc, and with respect to other assets, as in the case of gold. But it would take more value in relation to the euro, which would be “complicated”, and other currencies.
For his part, Leonardo Chialva, of Delphos Investment, commented that after starting a war one might think that the generalized fear of high risk would strengthen the global reference currency. That is, to the US dollar. But in this case, from his point of view, the effect would be initial and some time later it could be reversed.
“If that power (the United States) is involved in the conflict and has to spend a lot of money to be able to participate, then that spending has to be liquefied and later its currency should lose value. In the event of a war, if the United States gets fully involved, in the medium term the dollar could weaken,” the specialist said.
