Why does the value of the dollar increase?

 

The US dollar reached its highest level in 20 years compared to other major world currencies.

This means that the dollar is more expensive to buy, and the dollar can buy more pounds, euros or yen compared to their exchange rates. This affects the business and the economy of the whole world. 

 How strong is the dollar? 

  The dollar index (DXY) - which measures the value of the dollar against most of the world's major currencies such as the euro, the pound and the yen - is set to rise by 15 percent in 2022.

 

 This means the dollar has reached a value it has not reached in 20 years.## Why is the dollar strong?

The Central Bank of America has increased the interest rate of the country several times to solve the problem of inflation. This makes borrowing money very expensive

This means that a person will get a lot of profit if he buys bonds that the government sells, which makes investors want to buy government bonds that are called ``Bonds''

These loan documents are a way for the government to borrow money from companies or businesses that will pay in the future with increased interest. They are generally considered to be no problem or risk to purchase. 

 In July 2022 alone, foreign investors bought $10.2 billion from the US government, so they now have $7.5 trillion. 

 

 Investors must buy dollars to be able to buy these bonds, or this demand for dollars will increase the value of the dollar. 

 

Therefore, if investors sell the bills of other countries in order to buy dollars, then those currencies will decrease in value. The value of the pound increased significantly when the British government announced a tax hike. 

 Investors also buy dollars whenever the world economy is under pressure, because of the size of the American currency, this makes them a safe haven. This also made the value of the American currency increase.

 

 Many countries in Europe and Asia are suffering from economic problems due to the rise in gas prices caused by the crisis in Ukraine. 

 

 However, this strength of the dollar hurts American companies that get their money from other countries, companies such as Apple and Starbucks.

How does the strength of the dollar affect the currencies of countries that do not have a strong currency?

Countries whose currencies are weak can benefit from a stronger dollar because it will make the goods and services they sell to the United States cheaper, which will increase their trade with the United States

 But on the other hand, the strength of the dollar will make the goods and services bought from America more expensive.

 

 Since the price of oil is determined by the dollar, the strength of the dollar will make oil more expensive in many countries around the world. 

 

 For example, in Kenya, when the country's currency, the Sulai (shilling), has fallen to an unprecedented level against the dollar, the price of fuel has increased by almost 40 percent since the beginning of the year 2022.

 

 Governments and companies in many countries often borrow in US dollars rather than in their own country's currency because it is more secure.

 

 As the value of the dollar increases, the countries face more pressure to pay their debts with their own money.

 

The government of Argentina is among the countries that have suffered the most from the increase in the value of the dollar.## It prohibits the entry of certain goods into the country, including luxury boats, wine and honey in order to protect the value of its assets.

Every year, workers abroad send an estimated $625 billion to their families back home. These funds can be very useful for the economy of the countries.

 Foreign workers in the United States alone send $150 billion annually; more than 30 billion to Mexico, 16 billion to China, 11 billion to India, 11 billion to the Philippines.

 

 The high value of the dollar is what defines its value in other currencies of the world. This makes those who receive money in dollars more hesitant.

 

 Bernadette Cruz lives with her three children in San Jose, Philippines.

 

 The family depends on the money that her husband, Fred, sends to them from New York, the United States, where he has been working as a nurse for 18 years.

 

The value of the dollar increased by 13.5 percent against the Philippine peso. "The prices of all commodities have risen in the Philippines, including food and labor," according to Bernadette.

 "But the high value of the dollar helps me to buy the things we need. What is on the money shows the sacrifice my husband is making abroad."

What are countries doing about the rising value of the dollar? 

Many countries around the world are looking at how to increase the value of their currencies by increasing their interest rates.

In Argentina, the interest rate in the country's central bank is 69.5 percent. In Ghana, it is 19 percent, 14 percent in Nigeria, and 13 percent in Brazil.

On the other hand, high interest rates mean that it is difficult for families to take out loans.

 Companies will suffer, and may even lay off workers. Families will reduce spending.

 

As a result, this can lead to economic collapse of countries.