US Markets| Thoughts on US Dollar

Kon How
2023-01-12

How is it possible for a higher U.S. interest rates and yet a weaker Dollar?

Some countries are also beefing up gold reserves helping to push up prices. That effort has become easier in recent months as the value of the dollar has weakened, making it cheaper for countries outside of the United States to buy gold.

“We are seeing a lot of physical buying of gold from central banks. Not surprisingly, a lot of it is from Russia and China, countries that are keen to reduce their dependence on the US dollar,”

Question: How is it possible for a higher U.S. interest rates and yet a weaker Dollar?

Answer: When inflation exceed interest pay-out, investors will flock to inflation hedge asset like Gold. Current inflation rate at 7.1% and interest rate at 4.5%.

The real danger will be with the continuous rise in interest rates and yet the dollar starts weakening, just like the pound. The dollar is trading lower in the past weeks, I am keeping watch on this closely. However, it is not all bad news, we can invest differently…

$Australian Dollar - main 2303(AUDmain)$ $USD/CNH(USDCNH.FOREX)$ $Gold - main 2302(GCmain)$

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