© Reuters The euro depreciates 7% this year and falls to 2017 levels (1.05 dollars)
Madrid, Apr 30 (.).- The euro has depreciated 7.3% in the year and is exchanged at the end of April at 1,054 dollars, a level not seen since the beginning of March 2017, due to the tightening of the policy by the Fed, which raised interest rates last March and plans to raise them again in May.
The euro ended last year at 1,137 dollars, marked its annual maximum on February 10 when touching 1.15 units and the minimum last Thursday at 1,047 dollars, after the US Federal Reserve (the central bank) increased rates in March by a quarter of a point, to place them between 0.25% and 0.5%.
In addition, it announced the reduction of its balance through the sale of debt (next week it could increase the price of money by half a point).
This depreciation, which has also affected other currencies, has been influenced by the war that Russia has waged in Ukraine and the sanctions imposed on Russian banks and exports, and because investors have not paid much attention to the messages from the European Central Bank (ECB), which has also warned of the forthcoming tightening of its monetary policy.
The global strategist of the investment manager PIMCO, Gene Frieda, believes that the freezing of Russian reserves due to the sanctions imposed by the invasion of Ukraine enhances the role of the US dollar as the world’s main reserve currency, with a share of 59 %.
He also comments that the share of the euro in world reserves, now at 20%, should rebound if rates rise, while the Director of Risk at foreign exchange brokers Ebury, Enrique Díaz-Álvarez, considers that the fall of the euro begins to be a bit exaggerated, “because the market has not paid enough attention to the gradual change in the ECB’s point of view”.
In his opinion, the speeches last week by its president, Christine Lagarde, and its vice president, Luis De Guindos (on ending debt purchases due to the pandemic in the third quarter and raising rates in July) are close to the US position, so “when the market begins to internalize this change in the ECB’s attitude towards inflation, we will be able to see rebounds in the euro”.
In addition, he points out to EFE that the Federal Reserve’s response to the rise in prices in the last 12 or 18 months (the US CPI stood at 8.5% in March) “is much more aggressive”, and this is translates into expectations of accelerated rate hikes, among the fastest in history, albeit starting from very low levels”.
While the ECB and the Bank of England have “a much more cautious attitude, wait and see”, which influences the value of the euro, he indicates.
For Monex Europe, the growth differential between the euro zone and the US is also weighing on the price of the currency of the Old Continent, which on Thursday marked its lowest in five years after Russia cut off gas to Poland and Bulgaria for not paying it. in rubles, which could spread to other countries and affect economic activity (German GDP grew by 0.2% in the first quarter).
The monetary policies of other countries are also favoring the strength of the dollar. Thus, Japan’s decision to maintain stimuli and leave interest rates at -0.1% has determined that the yen will depreciate 14% in these four months against the dollar, going from 115.08 yen per dollar in which closed in 2021 at 131.25 yen on Thursday.
In China, the measures adopted against the expansion of covid-19 and other expansive monetary decisions, such as lowering the reserve ratios of banks, have determined that the yuan will depreciate this year by 4.6% against the dollar, going from 6.3561 yuan per dollar at the end of last December to 6.6505 yesterday.
Better performance has been the pound sterling, which has gained 7% against the dollar since January (ends the week at 1.2574 pounds), while the Swiss franc has lost around 6%, to 0.972 francs per dollar. For its part, the , the most widely used cryptocurrency, has lost about 17% of its value this year, up to $38,600.