The Massacre of the "King Dollar"... Collapse in Yen and Pound Values

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina, Reporter Seo Sojung] The 'King dollar' has awakened from its nap.

As the value of the US dollar soars to its highest level in 20 years amid monetary tightening and recession concerns, the currencies of major countries are plummeting one after another. The value of the Japanese yen against the dollar has fallen to its lowest level in 24 years. Following the euro, warnings have emerged that the British pound will soon break the '1 dollar = 1 pound' parity.

On the 1st (local time) in the New York foreign exchange market, the dollar index, which represents the value of the dollar against the currencies of six major countries, rose 0.88% from the previous trading day to 109.66. This is the highest level in about 20 years. The dollar index once reached 109.991 during the session, approaching the 110 level.

This dollar super-strength is a result of the Federal Reserve (Fed), the central bank, strengthening its hawkish (monetary tightening) stance day by day, combined with robust US economic indicators, causing a rapid influx of money into the safe-haven dollar.

On the other hand, the value of major currencies plummeted. In the foreign exchange market, the euro-dollar exchange rate traded at $0.9946, down 1.07% from the previous trading day. The pound also showed a sharp decline, recording $1.149 during the session. The yen exchange rate, which was in the 115 yen range per dollar earlier this year, traded at 140.21 yen on this day, falling to its lowest level in 24 years since August 1998.

According to the Seoul foreign exchange market on the 2nd, the won-dollar exchange rate opened at 1,356.0 won, up 1.1 won, quickly surpassing the previous day's intraday record high of 1,355.1 won. Some forecasts suggest that the won-dollar exchange rate could rise to 1,400 won in the second half of the year.

Bloomberg News diagnosed, "The dollar rally is causing a massacre among global currencies." Edward Moya, chief market analyst at foreign exchange trading firm OANDA, warned, "The King dollar awakened from its nap could inflict much greater pain on European currencies."

The dollar super-strength is expected to continue for the time being. While economic outlooks for China and Europe are worsening, US economic indicators are showing a robust trend. This strengthens expectations that the Fed will continue high-intensity tightening, leading to a sharp rise in government bond yields and a strong dollar. Moreover, the yen is under strong downward pressure as the Bank of Japan (BOJ) maintains its monetary easing policy.

Generali Insurance Asset Management forecasted, "Due to the global economic slowdown, especially Europe's energy crisis, there is room for further dollar strength in the future." Bloomberg News also noted in another article, "Concerns about a UK recession raise the possibility of parity with the dollar for the pound, which was previously unimaginable."

This content was produced with the assistance of AI translation services.