Surging global oil prices bolster U.S. dollar

Rising oil prices and concerns related to China are driving up demand for the U.S. Dollar as a safe asset, raising worries about the return of the “king dollar.” The dollar’s value recently hit a six-month high, while the Japanese yen reached its lowest point in ten months, reflecting global currency fluctuations.

On Wednesday, the U.S. Dollar Index (USDX), which measures the dollar’s strength against six major currencies, reached 105.03, a six-month peak, before settling at 104.95. The dollar index dipped below 100 in July when the Fed was expected to ease its strict monetary policy. However, it has now risen back to 105 due to surging global oil prices and concerns about the Fed’s persistent austerity approach. This strong dollar has caused significant drops in the values of the yen, won, and yuan, with declines of 11.4%, 5.35%, and 5.8%, respectively. On Thursday, the dollar-won exchange rate increased by 4.9 won, closing at 1335.4 won, while the KOSPI index fell by 15.08 points, closing at 2548.26 won.

The Japanese Yen has remained strong for three consecutive days despite warnings of potential intervention by authorities, reaching 147.873 yen, the highest level since November 2022. The Euro has declined from 1.12 to 1.07, marking its lowest point in three months.

According to Reuters, Joseph Manimbo, a senior market analyst at Convera, a U.S.-based B2B payments company, attributed the strengthening of the U.S. dollar to its status as a safe asset amid global economic stagnation, particularly in China and Europe. Manimbo also pointed to “inflationary pressure, which reduces expectations of the Fed lowering interest rates” as a key factor behind the strong dollar.


dhlee@donga.com