The geopolitical crisis that erupted in eastern Europe more than a month ago will be remembered by many as the end of the era of "peace dividends", when the planet enjoyed decades of global peace and stability without major military conflicts, the South China Morning Post reports.
Robert Kiyosaki, a well-known American entrepreneur and author of a number of business bestsellers, believes that the world expects the US dollar to fall in the future. He calls "on the eve of the Third World War" to invest in gold and digital assets.
"The world is in trouble. The national debt will skyrocket. The dollar is about to collapse. Buy more gold and bitcoins before the third world War," he said.
Larry Fink, chief executive Officer of BlackRock, is confident that the world will never be the same again.
He recently stated that the Russian-Ukrainian conflict could lead to an acceleration of the use of digital currencies as a settlement tool, which will give an international impetus to the globalization of the last three decades.
"A thoughtfully designed global digital payment system can improve the settlement of international transactions, while reducing the risk of money laundering and corruption," he believes.
At the beginning of last month, US President Joe Biden instructed the federal government to explore the possibility of creating a digital dollar, which could change the way money is moved and used around the world.
Some experts fear that the introduction of the central bank's digital currency (CBDC) into the financial system will allow the United States not only to block international banking transactions in dollars or related currencies, but will threaten any private wallet.
"In fact, this is an absolute financial power that will extend beyond the borders of the United States. Accordingly, the question of the possible blocking of dollars on the territory of another country passes from the category of fiction to the practical plane. The money will lose any anonymity," they note.
Such concerns are caused by the fact that in the long term China may create a closed ecosystem for the use of its digital currency (eCNY) with its numerous trading partners. In this case, the Chinese government would receive detailed information about the transactions of each entity within this system, which would become an additional source of power.
Analysts do not rule out that in the foreseeable future there will be two global monetary systems – Western and Chinese, which will work differently and partially overlap each other, causing discomfort. At the same time, the continued use by the United States of the American currency as a weapon against the so-called "rogue states" will further undermine confidence in the dollar, the degradation of which will provoke a new currency chaos, experts warn.
So far, the advantages of the United States, due to the combined size of the economy and the openness of financial markets, allow the US dollar to occupy a dominant position in the world. It still remains the main beneficiary of flows to "safe havens".
"The USD index has not impressed recently, but it has demonstrated some stability, and the growth potential remains against the background of continued hawkish statements by Fed officials and market expectations for rates, which include an increase in rates by almost 100 bps during the next two FOMC meetings," Westpac analysts said.
They predict a breakthrough of the USD index above 100 in the coming weeks.
The US central bank will next make a decision on monetary policy on May 4-5, and futures on the federal funds rate show a 71% probability of a 0.5% rate hike.
The second of the two FOMC meetings will be held on June 14-15.
In the middle of the week, the greenback dropped to a four-week low around 97.68 after a month-long consolidation that followed a breathtaking rise to a more than nine-month high at 99.41.
On Thursday, the US currency was able to regain its composure and resumed its offensive not only against its European counterparts – the euro and the pound, but also against the Japanese yen.
Cash flows caused by the fact of the completion of the calendar month and quarter served as a tailwind for the dollar.
It has also gained support thanks to its status as an outstanding safe haven as peace talks between Russia and Ukraine have stalled.
The greenback returned to growth, playing off strong US inflation data.
The report published the day before showed that in February the index of personal consumption expenditures increased by 0.4%. Compared to January, the rise slowed down somewhat, but the annual PCE rose to 5.4%, marking a new almost 40-year high.
Increased inflation leads to a decrease in the desire to save and forces Americans to return to the labor market in search of earnings.
Indirect confirmation of this is the weekly data on unemployment benefits in the United States.
Thus, the number of initial appeals increased to 202,000 from 188,000 a week earlier. However, the total number of people receiving unemployment benefits decreased by 35,000, to 1,307 million people. This is the lowest figure since the end of December 1969.
A strong labor market gives the Fed carte blanche to put more pressure on the pedal of tightening monetary policy. This is good news for the dollar.
The lack of positivity on the geopolitical front, combined with the renewed strengthening of the greenback, led to the fact that the EUR/USD pair lost more than 100 points on Thursday and remains under pressure around 1.1050 on Friday.
Concerns about the energy crisis in Europe are intensifying after Russian President Vladimir Putin set a deadline for European buyers of Russian gas to pay in rubles on Friday, which they are not ready for. Moscow supplies about a third of all gas to Europe.
The EUR/USD pair has been receiving support around 1.1000 since the beginning of March, but downside risks remain, say Rabobank economists, who expect the pair to move down to 1.0800 over the next month.
"We believe that the EUR/USD exchange rate will remain lower this year than it could have been without the geopolitical conflict and energy uncertainty, and we keep the 1-month forecast for the pair at 1.0800 to reflect the continuing risks to the eurozone economy," they said.
"If the market remains confident that the eurozone will be able to avoid a recession, it is likely that the euro may hold a range from $1.09 to $1.11 in the coming months. More specific signs of peace are likely to shift this range to the levels of $1.10-1.12," Rabobank believes.
Financial markets have not yet fully incorporated the expanding divergence in the rates of the Federal Reserve and the European Central Bank into prices, so the euro will depreciate even more against the dollar, Natixis strategists believe. The EUR/USD pair will collapse if the Russian-Ukrainian conflict spreads to Europe, they note.
Concern about Russian gas supplies to Europe affected not only the single currency, but also the pound, which is close to showing weekly losses against the US dollar at the level of 0.4%.
Before the Russian-Ukrainian conflict, the pound was considered one of the most promising currencies for this year, as the Fed looked lagging behind the Bank of England in terms of tightening monetary policy.
However, taking into account the geopolitical uncertainty and looking at how the British economy is slipping into stagflation – a state characterized by low real output and high inflation, the BOE took a cautious position and lowered its rate forecast.
The central bank really faces a difficult task: if the rates of real income growth of the population are so low, how can inflation be contained by tightening policy without sending the economy into recession? In the second quarter, according to forecasts, inflation in the United Kingdom will accelerate to 8%.
Although the Bank of England is betting that consumer price growth will begin to slow down at the end of this year, the softening position of the central bank is likely to remind the pound more than once.
The GBP/USD pair closed almost flat on Thursday. On Friday, it continues to trade in a sideways range above the 1.3100 mark.
If the pair closes below this level, there may be additional losses in the direction of 1.3050 and 1.3000.
On the other hand, the 100-day moving average at 1.3135 can be considered as an intermediate resistance before 1.3160 (50-day moving average) and 1.3200 (50% Fibonacci retracement level).
The USD/JPY pair has risen by 0.4% this week, continuing a three-week growth of 6.5%.
"The arguments in favor of the USD/JPY pair going much higher are still convincing, since the Fed's rate hike will revolutionize the hedging arithmetic for investors using the yen, and the sensitivity to hedging costs is growing," RBC Capital Markets analysts said.
"It is likely that this flow has not happened yet, and the March rally was mainly caused by investors outside Japan expecting the yen to sell on the domestic market. If the positioning improves, we will return to buying on the fall of the USD/JPY pair," they added.
The USD/JPY pair resumed growth after a downward correction to 121.30. TD Securities sees the level of 120 as the basis and predicts a return of the pair to 125.00 in the second quarter.
"We see the potential for the USD/JPY pair to move upward until the end of the Fed tightening cycle begins to clearly loom on the horizon, unless the Bank of Japan somehow magically decides to follow the example of the Fed. At a minimum, we think that this indicates the level of 120 as the basis for the pair until we pass the active phase of Fed tightening. The earliest when it can be outlined is about the third quarter. However, at the moment, the USD/JPY drawdowns should lose momentum and fade away," the bank's strategists noted.
"We forecast the pair to return to 125, but a more aggressive attitude of the Fed could easily push it even higher," TD Securities said.
