2022 was the craziest year with major companies collapsing, Putin making the dumbest decision in his and Russia’s life, and the world going into an energy crisis. The Fed wasn’t just sitting and watching the events, either, it started increasing interest rates to try and slow down the inflation to controllable levels. In this article, we will analyze how some currencies still were able to stand strong against the dollar despite a major war in Europe and Fed’s fierce battle against inflation.
Currencies that stand their ground against the dollar
Euro was mostly falling in 2022 because of the energy crisis caused by Russian aggression against Ukraine. The war in Ukraine forced western society to impose strong sanctions against Russia, reducing oil and other important goods exports from the aggressor country. This has led to an energy crisis for Europe, weakening the Euro to a point where it was almost 1:1 price with USD. In 2023 the picture changed and the Euro started gaining ground. This was caused because the energy reserves were filled, and the winter seemed warm, decreasing the impact of Russian sanctions.
GBP looks strong this year as its price rose during the first weeks of 2023.
It’s currently tested the support level and seemed to fail, breaking it. This could weaken GBP for some time, as the next support level is located at 1.20. Let’s continue our research with more exotic currencies.
The Brazilian Real had a strong start in 2023 against the dollar, this is caused mainly by the fact that Brazil’s oil exports were higher in 2022 than in previous years. Since Russia’s oil exports plunged by almost 80% in Northwest Europe, the pressure on other oil-producing countries to increase their exports was higher. This caused their currencies to gain more power. But there were peculiar exceptions to this trend as well.
For example, Georgian Lari was gaining power against the dollar because many Russians had to escape Putin’s mandatory conscription for war. This caused hundreds of thousands of Russians to search the shelter in Georgia, resulting in higher demand for GEL Georgia’s fiat currency. If we look at the chart below, GEL started increasing in power after the war was started, the second wave of this trend started in September when Putin declared conscription.
Gel quickly strengthened its position and is now sitting at a comfortable level. You can check the GEL forecast for 2023 (In Georgian) on this website, where many important details are extensively explained in Georgian. This was probably the most unpredictable currency rise since the war started. Other currencies that rose in power during 2023 were mainly the oil exporter countries, just as Brazil.
Kuwait seems to level up the game and plans to increase diesel exports by five times. This is understandable as Russia thanks the sanctions with decreased oil exports. Kuwait Dinar seems to gain momentum, we can only watch and see how it manages to maintain this upward trend.
Generally, any oil-producing countries’ currencies are going to have a field day with USD this year, as Russia seems determined to completely destroy its own military by refusing to admit defeat.
USD at the beginning of 2023
The US Dollar had a strong start in 2023 as Fed’s interest rate hikes started to slow inflation. Since the USD is the world reserve currency, the Fed’s anti-inflation policies will increase the dollar’s stability and make it hard for other currencies to stand their ground. Despite this, there are still currency pairs that were strengthening during the beginning of 2023, caused mainly by the war in Ukraine. Major currencies had a hard time during 2022 because of the energy crisis and the US Fed policies.
USD started strong in 2023. The main currencies that were able to stand their position were from oil-producing countries. Since Russia was hit by sanctions, it no longer was able to export its oil and make money strengthening other oil producers worldwide. Even Kuwait was able to stand its ground and is planning to increase the production of diesel.
There was an instance of a currency gaining strength for peculiar reasons. Georgian Gel was able to strengthen because of Russian immigrants that were escaping Putin’s mandatory conscription for war. Despite having more than 9% inflation, Gel still holds as more and more Russians are flooding the country in desperate attempts to run from Putin’s regime.
This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.