At present, the problems in other major markets are more than in the US. The European economy has been shaken after Russia's attack on Ukraine. On the other hand, economic activity remains sluggish due to the lockdown imposed due to the spread of Kovid-19 in China. The Shanghai Composite Stock Index has fallen 16 percent this year.
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Fedearl Reserve Bank |
The Wall Street Journal's dollar index has gained eight
percent so far this year. Its value has increased by seven percent compared to
the Chinese currency Yuan. Most of this growth has happened during the last one
month itself. The dollar has become costlier this year by 12 per cent against
the Japanese yen and 10 per cent against the Swiss franc.
Federal
Reserve job made easy
According to economists, there will be significant economic
consequences of the dollar's rise. When the currency becomes expensive, the
import bill of a country decreases. It helps in controlling the inflation rate
within the country. The newspaper The Wall Street Journal has said in an
analysis that the recent increase in the price of the dollar will make the task
of the US Central Bank Federal Reserve easier. Now there will be no more
pressure on him to raise interest rates.
There are many reasons given for the rise in the value of
the dollar. The most important of these is that interest rates in America are
much higher than in other wealthy countries. Christine Forbes, a professor of
economics at the Massachusetts Institute of Technology (MIT), told the Wall
Street Journal- 'Right now the US ten-year Treasury bond is yielding a gain of
2.9 percent. Whereas in Germany this rate of profit is 0.95 percent, in Britain
1.7 percent and in Japan 0.2 percent. Investors are preferring to invest their
money in the Federal Reserve due to the guarantee of higher returns in the US.
Experts have also drawn attention to the fact that at
present the difficulties in other major markets are more than in the US. The
European economy has been shaken after Russia's attack on Ukraine. On the other
hand, economic activity remains sluggish due to the lockdown imposed due to the
spread of Kovid-19 in China. The Shanghai Composite Stock Index has fallen 16
percent this year. The fall in the stock markets of China's Shenzhen and Hong
Kong is more than that of Shanghai.
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The gap on
the growth rate decreased
The International Monetary Fund has estimated that this
year's growth rate of China's economy will be able to reduce by half from last
year to 4.4 percent. On the other hand, the growth rate of the US economy will
be 3.7 percent. After 1989, there has never been such a small gap in the growth
rate of the two countries.
These signals have encouraged investors to invest in
dollars. The Federal Reserve has increased the interest rate by 0.75 percent so
far this year. According to investment bank Goldman Sachs, its impact on the
market has been many times greater than the actual growth. According to William
Duduli, former head of the Federal Reserve Bank, this is good news for the
Federal Reserve. He said- 'This does not mean that the Federal Reserve will
stop raising interest rates, but it will no longer be under pressure to do so
aggressively.'