Currencies Getting Creamed By The Dollar
In today's edition of YIYL, (You Invest, You Lose) we take a step back and look at the world's most powerful shitcoin, the US dollar, the deepest most liquid market, and the currency that underpins everything right now.
As the world finds itself short of energy due to supply chain bottlenecks, we need the coupon in which energy is traded and that is the US dollar. You can't say for certain swap lines purchase oil, gas, and other commodities without having the preferred coupon for trading.
As countries require these dollars to ensure they have a steady flow of energy into their countries dollar demand rises. As uncertainty in other markets continues to show, people want to get out of other local currency exposure and into dollars.
As Americans aren't spending as much as they used to, especially overseas due to higher interest rates forcing them to service debts, you're seeing dollar demand rise and in the process things that trade against the dollar gets crushed, primarily emerging market currencies.
Who is getting the worst of it
If we have a look at Hanke's worst-performing currencies against the dollar, you'll see that 18 of them have already lost more than 22% of their value against the dollar.
If you are in any of these countries, you've probably noticed a material drop in living standards and a material increase in the cost of living as your central banks trip over themselves to acquire dollars to service imports while these countries are selling exports at cheaper prices.
It's a vicious cycle you face dealing with the dollar-wrecking ball, and it won't be going away. Inflation numbers are showing no sign of slowing down in the US after the latest print and another rate hike is on the cards, which means more pain is to come for emerging markets.
Of course not every emerging market will be affected in the same way, if you're one with commodities, you can offset the dollar dominance, with the premium you're getting for your commodities, and help steady the ship.
This might even be a call to get your shit together in some countries and improve your commodity markets but I wouldn't hold my breathe.
The new Eurodollar system
Prior to the invention of stablecoins, it was pretty hard to get dollars if you're not in the US or able to tap into the Eurodollar market, but today, stablecoins have become a second Eurodollar market, people are now able to swap their local shitcoin for stablecoins or bitcoin and then into stablecoins and that demand shows no sign of slowing down.
This demand for stablecoins, and this settlement of transfers in stablecoins only means more liquidity leaks out of these countries. If you check out the demand for stablecoins in any of these countries listed above it is skyrocketting as people look for a way out of their local currency either to buy tihngs or just to avoid debasement of their savings.
I am no fan of the dollar myself, I don't own any I don't see the point if you can skip it and go to the asset that is demonetizing the dollar in my opinion. But for others, I understand the appeal the US dollar is the cleanest dirty shirt in the hamper so people are always going to opt for it instead if they had to choose.
Bitcoin's volatility isn't for everyone and when people are desperate to hold on to some semblance of stability, which isn't real but more psychological, the dollar is their safe haven.
If you are in an emerging market right now, has your dollar balance increased? HOw are things working in your neck of the woods
Source: - businessinsider.com
Dollar is just falling slower
Despite the strength in the dollar, it's not all rosy for the currency, as it's still suffering from record-high inflation and falls against commodities, energy and consumer goods. So sure there is greater demand for dollars both locally and internationally, but it's all relative and stability is really just in the eye of the beholder and your appetite for losses.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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