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In a world of collapsing currencies and market uncertainty amid the coronavirus chaos, the US dollar exchange rate experienced an overnight surge. Only a couple of weeks ago, the US dollar was struggling as the US Federal Reserve (Fed) refused to cut interest rates. However, since the Fed slashed interest rates to zero last Sunday, the US dollar has climbed 5% off its lowest level since September 2018. Here we look at the latest US dollar exchange rate and what this means for other currency markets.  

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Latest US Dollar Exchange Rates

The aggressive overnight uptrend in the US dollar (USD) reflected the high demand for the US currency, pushing other currencies lower. After the UK’s Chancellor of The Exchequer, Rishi Sunak, declared that fiscal stimulus strategies would be put in place to prop up the UK economy, the markets questioned whether this would filter down to businesses fast enough and priced pound Sterling accordingly.  The British pound to US dollar (GBP/USD) exchange rate fell to USD 1.20, close to the 2019 low, at the time of writing.

The euro to US dollar exchange rate also fell, falling 1.5% before trading around $1.10, its lowest level since late February. It’s difficult to say exactly how this currency pair will progress over the coming weeks but the US dollar shows signs of soaring against the euro if investors continue to scramble to safe assets as coronavirus fears continue to spread. 

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Why US Dollar Rates Continue To Surge

A clamber for liquidity has driven the surge in demand for the US dollar, resulting in the currency being in short supply with buyers even willing to pay a premium to buy it. In a bid to meet the high demand for the US dollar and improve liquidity, the US Fed has slashed interest rates and put strategies in place, such as encouraging banks to make use of the discount window and offering swap lines against some of the most highly traded currencies, including the Euro, to alleviate this. It remains to be seen, however, if such tactics will help in the long term. 

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US Dollar Exchange Rates Compared To Other Currencies

The Australian dollar to US Dollar exchange rate has fallen to its lowest point in 17 years, as the US dollar restores its safe haven currency status and the Australian dollar weakens. With the fortunes of the Australian economy so heavily linked with China’s economy, the adverse impact the coronavirus outbreak has had on China’s weakened economy is now being reflected in Australia. Resulting in the Reserve Bank of Australia (RBA) now expected to slash Australian interest rates to a record low this week. 

This week the Russian Ruble (RUB) has been the most significantly impacted of all emerging market currencies as crude oil prices have dropped to USD 28 a barrel. The collapse follows Russia’s decision to enter into an oil price war with Saudi Arabia last month. Whilst most central banks have begun to slash interest rates, Russia has yet to do so resulting in the ruble falling 3.3% to RUB 77.9900, its lowest level since February 2016.

In Asian markets, the coronavirus continues to weigh heavily on most Asian currencies. The Chinese yuan (CNY) has continued to weaken amid the US Dollar’s surge whilst the Japanese yen (JPY), which has remained as one of the leading safe haven currencies up until now, is now threatened by the surging demand for the US Dollar.

What effect would a weak US Dollar Have On Other Currency Markets?

Perhaps the biggest threat amid the surge in the US dollar is the danger to emerging markets and the US dollar debt, which will heavily impact China in particular. China currently has a debt of $2.03 trillion, which has only been made more difficult to deal with thanks to the US Dollar surge. China requires US dollars to help protect the Chinese yuan exchange rate. The US dollar surge will create pressure on both Chinese and international businesses who will struggle to keep up with the demand. This could then potentially contribute to a lack of demand for Chinese exports, which could then lead to a deficit. 

It’s clear that every US Dollar has its day but who knows just how long the scramble for the greenback will continue.