Currency
Visualizing Currencies’ Decline Against the U.S. Dollar
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Visualizing Currencies’ Decline Against the U.S. Dollar
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In a highly volatile and difficult year for many currencies and equities, the U.S. dollar has been a safe haven for investors.
The greenback has provided exceptional stability, with almost every currency around the world declining against the U.S. dollar in 2022.
This graphic visualizes almost 50 years of the Dollar Index’s returns along with the decline of major currencies against the U.S. dollar in the past two years using price data from TradingView.
U.S. Dollar and Major Currencies’ Returns in 2022
As shown in the graphic above, the past two years have seen nearly every major currency lose value against the U.S. dollar.
One of the currencies hit hardest is the euro, which briefly fell below parity (meaning the euro was worth less than one U.S. dollar) in September and October of 2022, before recovering with a 5.3% rally in November.
Currency | 2021 Returns | 2022 YTD Returns |
---|---|---|
Japanese Yen (JPYUSD) 🇯🇵 | -10.4% | -14.7% |
Indian Rupee (INRUSD) 🇮🇳 | 2.0% | -9.6% |
Pound Sterling (GBPUSD) 🇬🇧 | -1.1% | -8.0% |
Chinese Yuan (CNYUSD) 🇨🇳 | 2.7% | -8.6% |
Euro (EURUSD) 🇪🇺 | -7.0% | -6.0% |
Canadian Dollar (CADUSD) 🇨🇦 | 0.7% | -6.6% |
Australian Dollar (AUDUSD) 🇦🇺 | -5.7% | -5.2% |
Swiss Franc (CHFUSD) 🇨🇭 | -3.0% | -1.1% |
2022 YTD Returns as of December 14th 2022. (Source: TradingView)
However, the Japanese yen was the major currency hit hardest, having fallen more than 25% since the start of 2021. At the yen’s lowest point this year in October, the currency breached 24-year lows, resulting in the Bank of Japan intervening with $42.8 billion to support the country’s falling currency.
The Swiss franc and Canadian dollar have been the most resilient major currencies against the U.S. dollar since 2021, largely due to the financial and political stability of those nations. Along with this, Canada has benefitted from surging crude oil prices in 2022, exporting the majority of its crude oil across its southern border to America.
Three Reasons for the U.S. Dollar’s Strength in 2022
A variety of factors have contributed to the U.S. dollar’s strength in 2022. The rapid raising of interest rates by the Federal Reserve and tightening of their balance sheet has resulted in U.S. dollars becoming a more scarce and valuable yield-bearing asset.
As interest rates have risen, so have yields for savings accounts and fixed-income securities like U.S. treasuries, making them a more attractive alternative for investors.
At the same time, falling equity prices (especially in the technology sector) only further incentivized investors to pull out of riskier equity markets into the safety of the dollar.
Lastly, compared to many other global economies, the U.S. economy has remained resilient with the fewest risks on its horizon. Europe continues to face an ongoing energy crunch with the Russia-Ukraine conflict nearby, while China’s zero-COVID policies have hampered the country’s manufacturing sector, as well as other industries.
How Will Currencies Fare in 2023?
While the U.S. dollar has surged for much of 2022, its rally has started losing steam in the final months of the year.
In September of 2022 the Dollar Index was up 20% on the year reaching a high of 114.8, but has since retreated and given back more than half its gains for this year so far.
Investors around the world will be watching closely to see if the U.S. dollar’s rise will continue, or if this end-of-year reversal will carry through and provide major currencies some relief going into 2023.
China
De-Dollarization: Countries Seeking Alternatives to the U.S. Dollar
The U.S. dollar is the dominant currency in the global financial system, but some countries are following the trend of de-dollarization.

De-Dollarization: Countries Seeking Alternatives to U.S. Dollar
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The U.S. dollar has dominated global trade and capital flows over many decades.
However, many nations are looking for alternatives to the greenback to reduce their dependence on the United States.
This graphic catalogs the rise of the U.S. dollar as the dominant international reserve currency, and the recent efforts by various nations to de-dollarize and reduce their dependence on the U.S. financial system.
The Dollar Dominance
The United States became, almost overnight, the leading financial power after World War I. The country entered the war only in 1917 and emerged far stronger than its European counterparts.
As a result, the dollar began to displace the pound sterling as the international reserve currency and the U.S. also became a significant recipient of wartime gold inflows.
The dollar then gained a greater role in 1944, when 44 countries signed the Bretton Woods Agreement, creating a collective international currency exchange regime pegged to the U.S. dollar which was, in turn, pegged to the price of gold.
By the late 1960s, European and Japanese exports became more competitive with U.S. exports. There was a large supply of dollars around the world, making it difficult to back dollars with gold. President Nixon ceased the direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.
Although it has remained the international reserve currency, the U.S. dollar has increasingly lost its purchasing power since then.
Russia and China’s Steps Towards De-Dollarization
Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony.
As the United States and other Western nations imposed economic sanctions against Russia in response to its invasion of Ukraine, Moscow and the Chinese government have been teaming up to reduce reliance on the dollar and to establish cooperation between their financial systems.
Since the invasion in 2022, the ruble-yuan trade has increased eighty-fold. Russia and Iran are also working together to launch a cryptocurrency backed by gold, according to Russian news agency Vedmosti.
In addition, central banks (especially Russia’s and China’s) have bought gold at the fastest pace since 1967 as countries move to diversify their reserves away from the dollar.
How Other Countries are Reducing Dollar Dependence
De-dollarization it’s a theme in other parts of the world:
- In recent months, Brazil and Argentina have discussed the creation of a common currency for the two largest economies in South America.
- In a conference in Singapore in January, multiple former Southeast Asian officials spoke about de-dollarization efforts underway.
- The UAE and India are in talks to use rupees to trade non-oil commodities in a shift away from the dollar, according to Reuters.
- For the first time in 48 years, Saudi Arabia said that the oil-rich nation is open to trading in currencies besides the U.S. dollar.
Despite these movements, few expect to see the end of the dollar’s global sovereign status anytime soon. Currently, central banks still hold about 60% of their foreign exchange reserves in dollars.
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