VIDEO: The dollar "crazy" the financial markets
A strengthening dollar and rising interest rates have caused chaos in financial markets.
Financial markets around the world are facing major problems.
In Britain, the record fall of the pound has caused the Treasury and the Bank of England to panic and try to "calm" the markets, writes the British weekly "Economist".
The Japanese government was forced to intervenes in the foreign exchange markets to prevent the yen from falling for the first time since 1998.
The central bank of China announced it the record decline of the yuan against the US dollar, days after it raised the reserve requirement for foreign exchange trading in an attempt to limit currency outflows.
At the center of all this is the rise of the US dollar and global interest rates.
As it says "Bloomberg", the value of the dollar rose to a record level after the White House decided to reduce the chances of the currency weakening, at a time when other powerful currencies continued to "sink" and the yield on the Treasury touched the highest level since 2008.
The world's largest markets face special challenges. The new British government plans to introduce the biggest tax cuts in the country's recent history. Japan is trying to keep interest rates at record lows, and China is grappling with the fallout from its "zero-covid" policy.
But these markets also have common problems. Most world currencies weakened significantly against the dollar. The value of the dollar against the rest of the world's rich currencies has risen by 18% this year, reaching the highest level in the last two decades. Persistent inflation in the US and the simultaneous tightening of monetary policy make global markets volatile.
Global growth expectations are falling fast. In new forecasts released by the Organization for Economic Co-operation and Development (OECD) on September 26, global GDP is expected to grow by just 3% this year, down from the 4,5% they forecast last December.
For 2023, the OECD expects growth of only 2,2%. As a consequence of this, the prices of raw materials fall. The price of Brent crude oil returned to around $85 a barrel, the lowest level since mid-January. Copper prices on the London Stock Exchange on September 26 fell to the lowest level in the last two months.
The slowdown of the world economy may not mean a slow decline of the dollar, according to "Economist". Investors continue to invest in the "safest" currency, which means that at a time when the rest of the world's currencies are in decline, the dollar is rising. For countries and companies around the world, it's a frightening prospect.