Dollar exchange rate with major currencies and crude oil prices today, 21 July
As the Federal Reserve raises interest rates the dollar has surged against almost every other major global currency bringing with it both pros and cons.
Volatility continues to affect markets with inflation running hot globally and many central banks moving to stamp it out. The European Central Bank is expected to impose its first rate hike in over ten years Thursday.
June inflation numbers for the eurozone were up from the month before, with it now approaching double-digits the ECB may raise rates by more than the quarter percentage point predicted. This led to a rally in the euro reaching a two-week high against the dollar. The common currency for 19 of the 27 EU member states had been weakened to the point where it reached parity with the dollar last week for the first time in twenty years.
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Similar dynamics are playing out on the other side of the Atlantic. The Federal Reserve is due to meet next week to determine how much rates need to rise to tamp down the 9.1 percent year-on-year inflation reported in June.
The dollar had been rising against other major global currencies as stimulus was wound down but surged in part as a result of aggressive rate hikes by the central bank. The ongoing Russian invasion of Ukraine, which has created numerous disruptions in markets and helped exacerbate inflationary pressures, has prompted global investors to move assets to the perceived safety of the US, further strengthening the greenback.
Here’s a look at the gains the US dollar has made against other major global currencies over the past year...
| Currency | $1 buys | $1 bought 1 year ago |
|---|---|---|
| Euro | € 0.98 | € 0.85 |
| Pound Sterling | £ 0.84 | £ 0.73 |
| Indian Rupee | ₹ 80 | ₹ 75 |
| Canadian Dollar | Can$ 1.27 | Can$ 1.29 |
| Swiss Franc | CHf 0.97 | CHf 0.92 |
| Japanese Yen | Ұ 139 | Ұ 110 |
| Chinese Yuan | Ұ 7 | Ұ 6 |
| Mexican Peso | Mex$ 21 | Mex$ 20 |
Who is gaining for these market conditions?
For those in the US hoping to purchase luxury goods from other countries, a strong dollar will make these products cheaper. For instance, those who may want to import a luxury car from Europe, are paying nearly the same as European consumers as the two currencies are hovering around the same value.
The same applies to US businesses who may be paying less for imports. This could in the long-run help to decrease inflation as firms see costs decrease which could allow them to lower the prices of their goods. However, the inverse is true for exports which become more expensive to send abroad.
Economic slowdowns driving slump in price of crude oil
Crude oil prices have been dropping over the past month down close to 5 percent on concerns of economic slowdown in China from covid-19 outbreaks and recession in other major economies. But there are growing concerns that supply will remain tight and could lead to price increases in the future. As the Russian invasion of Ukraine continues, there are fears of energy shortages come winter.
Here is where the prices stood at the end of trading on Wednesday...
| Type | Price per barrel ($) |
|---|---|
| Brent Crude | 106.92 |
| WTI crude | 99.88 |
Historic revenues in the oil and gas sector
These prices are up over 35 percent compared to this time last year. All of these fluctuations come as “53 US exploration and production (E&P) companies reported higher revenue, resulting from increasing crude oil prices” during the first quarter of 2022. The US Energy Information Adminstration has reported that many of these companies have used these historic revenue levels to complete stock buybacks and distribute dividends. Additionally, the agency also reportd that “the aggregate valuation for these companies has increased to just below the previous five-year (2017-21) high.”