The dollar rebounded slightly on Thursday thanks to a rise in U.S. Treasury yields, which helped support the greenback after a decline seen earlier in the week. The rise comes at a time when the US economy is in a state of anxiety due to escalating trade tensions between the United States and the European Union. US President Donald Trump announced on Wednesday additional tariffs on EU goods, reflecting another escalation in the trade war between the two sides. Major U.S. trading partners have vowed to respond to Trump’s actions, adding to uncertainty in global markets.
Against these developments, the dollar rose 0.05% against the Japanese yen, to 148.31, as it managed to recover some of the losses it suffered earlier in the week when it fell to a five-month low against the Japanese currency. The rise reflects the impact of high yields on U.S. bonds, which usually support demand for the safe-haven dollar amid mounting global economic concerns.
It is clear that global and domestic economic factors continue to influence the movement of the dollar, as it continues to react to political and economic news, creating volatility in the exchange markets. As the trade war between the United States and other countries continues, the dollar remains under pressure from geopolitical tensions, at a time of growing concerns about its effects on global economic growth. In conclusion, the dollar remains in constant volatility as a result of economic and geopolitical developments, as trade tensions and rising bond yields affect its value. Markets are expected to keep a close eye on these factors in the coming days, which could determine the future directions of the US currency in light of global economic uncertainty.
The impact of the dollar rise on gold prices
A stronger US dollar is one of the main factors affecting the prices of gold and other financial assets. When the dollar rises, gold prices usually fall, as gold is considered a safe haven and is usually measured in US dollars. Thus, when the dollar becomes stronger, it increases the cost of gold for foreign investors, reducing demand for it and causing its prices to fall. The increasing strength of the dollar affects gold indirectly also through its impact on interest rates. When the dollar rises, many investors believe that the US economy is in good shape, which could prompt the Federal Reserve to raise interest rates. Raising interest rates usually increases the attractiveness of fixed-yield assets such as bonds, reducing demand for gold that does not yield a fixed return.
On the other hand, in periods of economic or geopolitical tensions, the US dollar experiences volatility. For example, in times of financial crisis or inflation fears, the demand for gold as a hedge against risks increases, leading to higher prices. But if the dollar rises continuously as a result of economic policies such as interest rate hikes or protectionist measures, gold may remain vulnerable to decline. For other financial assets, a stronger dollar has a dual effect. On the one hand, it could increase the cost of dollar-priced assets such as commodities and oil, which could lead to a decline in demand for them by international investors.
In short, the impact of a stronger dollar on gold and financial assets is intertwined and complex, as it is related to market movements, interest expectations, and other economic and geopolitical factors.
Factors affecting the value of the US dollar
The value of the US dollar is influenced by a number of economic and political factors that determine its strength in global financial markets. Among these factors, the interest rate set by the Federal Reserve is at the forefront of the influencing factors. When the Federal Reserve raises interest rates, the yield on dollar-denominated assets such as US bonds increases, boosting demand for the dollar and rising its price against other currencies. In turn, lower interest rates may reduce the dollar’s attractiveness, putting pressure on its value. The second factor is inflation. High inflation levels usually negatively affect the strength of the dollar. Inflation reduces the purchasing power of a currency, depreciating its value compared to other currencies. Therefore, the Federal Reserve seeks to maintain inflation at moderate levels through a tight monetary policy.
Other economic factors such as economic growth also play a big role in determining the value of the dollar. When the US economy shows a strong performance with high growth rates, investors’ confidence in the dollar increases, which supports it and contributes to its appreciation. In contrast, economic stagnation or slowing growth can lead to a weaker dollar. Government policies also play a role in determining the strength of the dollar. For example, trade policies, such as tariffs or threats of trade wars, can affect demand for dollars.
Finally, geopolitical events and global tensions also affect the value of the dollar. In times of crisis or uncertainty, investors may turn to the dollar as a safe haven, which supports it and its price rises. In times of geopolitical and economic stability, the dollar may depreciate if attention shifts to other markets.
