More recently, however, the cost of servicing the debt has risen, and is now almost on par with the defense budget as a whole. debt have been equal to about half the cost of defense.
Adding to this, the sharp uptick in interest rates have been a clear reminder that rising debt levels can be precarious.Ĭonsider that historically, interest payments on the U.S. However, President Joe Biden argues that the debt ceiling should be increased without any strings attached. In the 2023 version of the debate, Republican House Majority Leader Kevin McCarthy is asking for cuts in government spending. Department of Treasury, and Congressional Research Service. The above graphic shows the sharp rise in the debt ceiling in recent years, pulling data from various sources including the World Bank, U.S. could default on its debt, causing harmful effects across the financial system. Should Republicans and Democrats fail to act, the U.S. cash reserves could be exhausted by June 1 according to Treasury Secretary Janet Yellen. In January, the $31.4 trillion debt limit-the amount of debt 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.Ĭharting the Rise of America’s Debt CeilingĮvery few years the debt ceiling standoff puts the credit of the U.S. Investors around the world will be watching closely to see if the U.S. 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. dollar has surged for much of 2022, its rally has started losing steam in the final months of the year. 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. economy has remained resilient with the fewest risks on its horizon. Lastly, compared to many other global economies, the U.S. treasuries, making them a more attractive alternative for investors.Īt 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. dollars becoming a more scarce and valuable yield-bearing asset.Īs interest rates have risen, so have yields for savings accounts and fixed-income securities like U.S. The rapid raising of interest rates by the Federal Reserve and tightening of their balance sheet has resulted in U.S. Dollar’s Strength in 2022Ī variety of factors have contributed to the U.S.
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. dollar since 2021, largely due to the financial and political stability of those nations. The Swiss franc and Canadian dollar have been the most resilient major currencies against the U.S. 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. However, the Japanese yen was the major currency hit hardest, having fallen more than 25% since the start of 2021. CurrencyĢ022 YTD Returns as of December 14th 2022. dollar) in September and October of 2022, before recovering with a 5.3% rally in November. 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 and Major Currencies’ Returns in 2022Īs shown in the graphic above, the past two years have seen nearly every major currency lose value against the U.S. dollar in the past two years using price data from TradingView. This graphic visualizes almost 50 years of the Dollar Index’s returns along with the decline of major currencies against the U.S. The greenback has provided exceptional stability, with almost every currency around the world declining against the U.S. dollar has been a safe haven for investors. In a highly volatile and difficult year for many currencies and equities, the U.S.
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