The greenback has been performing optimally during trading sessions and has been ruling the roost in the foreign exchange market. In fact, the Dollar Index (DXY) has received a boost with euros being sold off quickly during last week’s trading session. The weakening euro was responsible for setting the tone for the rise in the USD during the trading session.
Another factor that has had a major effect on the exchange rate of USD was the selling of emerging market currencies. The Turkish lira (TRY) and the Russian ruble (RUB) led from the front as these risky currencies were sold off briskly, allowing the USD to surge ahead.
The TRY is on the verge of collapsing as there is fear in the forex market that the Turkish Central Bank will lose its independence. Also, Turkey is having a war of words with the US. On the other hand, with the US imposing more sanctions on Russia, it is causing the RUB to tumble.
Forex analysts from ING have stated that politics has been controlling the forex exchange market at the moment, and in the near future these regional politics would govern the FX markets. The analysts went on to state that it is difficult to determine whether any currency is safe at the moment.
ING went on to clarify that all currencies are at risk. However, the USD is doing quite well and regardless of which currency it is paired with, it comes out on top.
The trade war between China and the US is also affecting the currency market along with uncertainty surrounding the next trade action that the White House will take. To add to the woes, US sanctions against Turkey and Russia, geopolitical issues in the Middle East, the political problems in Italy, and the issues Europe is facing due to Brexit are wreaking havoc in the foreign exchange markets across the world.
The CAD too is waging war, which had mixed results in the recent trading session after Canada got into a quarrel with Saudi Arabia. However, presently the most volatile currency is the RUB, which is being affected by the latest round of sanctions by the US and a pending bill in the US. The volatility of the RUB is also helping the USD to stay high, according to the analysts at ING.
Forex experts reckon that for the next few months, the RUB will continue to experience pressure, particularly since the mood in the US will worsen with the mid-term polls coming up in November. There is a pending bill in the US Senate that specifically prohibits participation in any new Russian sovereign bonds. Hence, these political issues will work in favour of the USD, keeping it high in the near-term.
The USD is the top-performing currency and it looks like no other currency is poised to challenge it at the moment. Amid all the trader wars and sanctions, not only has the USD preserved its position, but it is also strengthening it.