For the first time in history, the dollar outperformed the euro. The US currency was quoted this Friday, July 8, at 0.98 euro cents.
(Read: The dollar exceeds the euro for the first time in history).
The prospect of a gas shortage in the Eurozone prompts traders to move away from the Eurozone currency. And, to avoid a blow to economic activity that this would represent, the European Central Bank (ECB) hesitates, for the moment, to raise its interest rates too quickly, despite inflation.
According to Jeisson Balaguera, an analyst at Values AAA, this situation of uncertainty in the euro zone has caused the euro to lose its value against the dollar. It is in this part of the world, moreover, where there will be a direct effect. Specifically for those who have savings or obligations in euros, because the purchasing power of those who have income in that currency will decrease, explains the analyst.
Now, for Juan Eduardo Nates, senior foreign exchange associate at Credicorp Capital, there will be a positive effect for the euro, especially The investors. “In times of currency weakness, it is more attractive to buy and invest in the region where it is cheaper. If investors start from the US dollar, it is much better for them to buy in the euro zone than to buy it in the United States. So, beneficial for economic activity in the euro zone,” he explains.
Nates explains that this situation would affect the Colombian peso if the fall were independent. That is, if only the euro were falling. If the dollar remained stable, it would benefit the country to the extent that it would be cheaper to buy euros or invest in Europe.
However, to buy euros in Colombia you have to mediate through the dollar, according to Nates. Faced with a weakened Colombian peso against the dollar, it is difficult to acquire euros.
The pound sterling is devalued
However, the pound sterling, the official currency of the United Kingdom, is also being outperformed in price against the dollar. For Nates, this situation is beneficial for the US dollar as long as the expectations of rising interest rates are more aggressive on the part of the US Federal Reserve (FED) than those of the other central banks.
Although a significant rate increase had been made in the United Kingdom that allowed it to remain strong in the market, there has been a political upheaval in recent days that has a direct impact on its appreciation. Nates refers to the resignations of the main secretaries of the Government and of the Prime Minister Boris Johnson.
“This generates significant uncertainty that is punished through the currency,” he points out.
(Also: Dollar: what are historical highs due to and what is coming for the currency).
However, both experts agree that the depreciation of certain currencies is also subject to their interest rate policies.
“The yen, the Australian dollar, the Swiss franc and other currencies independent of the euro are having a significant depreciation due to the rate differential,” they clarified.
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