The US dollar has enjoyed a strong run in 2022, climbing against many of the world’s other major currencies. As we approach 2023, the big question is whether this level of performance will continue or if the dollar will fall. We also need to consider what effect the strength of the USD may have on businesses next year.
Predictions for 2023
A recent study by a team of economists from the Société Générale suggests the dollar will be the weakest of the G10 currencies, which are the ten most widely traded currencies globally. They believe that the American currency won’t fall in a straight line throughout next year but that it will lose most of the ground that it’s gained in 2022.
The Federal Reserve’s policy of hiking interest rates has been fueling the USD’s rise, with high energy prices also playing a part. What happens next largely depends upon whether inflation is brought under control and how soft a landing the economy has. With so many variables at play, it’s difficult to predict exactly what will happen, which is why not everyone agrees it will fall.
Some analysts suggest the dollar will stay strong in 2023, as it is seen as a safe haven for people around the world in times of economic and political turmoil. Therefore, if 2023 starts more positively than 2022, it could cause the USD to lose value while continuing uncertainty in the markets and rising inflation could lead to it continuing to soar.
The uncertainty helps to make the forex market a popular choice for traders looking to benefit from changes in the exchange rates. This information on CFD forex trading confirms that it’s the biggest financial market and one of the most liquid, with a $6.6 trillion value. Currency trading is carried out on a 24/5 basis and traders can look to benefit from price rises or falls on their chosen currency pair. Source: Pixabay
The Main Effects of the Dollar’s Strength
What will the rise or fall of the US dollar in 2023 mean for businesses and consumers across the planet? Since many countries use this currency for imports and exports, the USD’s strength directly affects the prices that consumers pay and the profit margins that businesses can hope to achieve.
For example, in a country with its own national currency but uses dollars for imports, a more expensive dollar raises the cost of the goods they buy from abroad. In terms of exports, they can hope to earn more money by sending goods to other countries and receiving dollars.
This means that countries with more exports than imports will generally benefit from the dollar being stronger, while the opposite is true for those nations who import more than they sell to other countries. The current strength of the dollar has been linked to the cost of living crisis being felt in various countries, so a drop in value for the currency would be particularly helpful in those places.
2023 seems likely to be another year of varying rates in the currency market, which will have a big effect on many aspects of our lives. However, for the moment, opinions are split on what is most likely to happen in this respect.
