These days it is very common to read news on economic issues that are directed at the price of the dollar, high interest rates, possible economic recession, high inflation, in short, issues that, if analyzed in depth, go hand in hand, are synchronized. But in this space, mainly the behavior that has been occurring with the dollar during the last period will be addressed, which as reflected in the following graph.

In this table, it can be seen that there have been significant variations since the year began at a price of $4,084, in the month of July, precisely on the 12th, it went to $4,627 later in the month of August, precisely on August 14, The dollar decreases $429 compared to the highest peak of July 12, remaining at a value of $4,198. As of this last mentioned date, the dollar began a path of ascent in its price, reflecting some high peaks from October 17, reaching the famous figure predicted by some analysts of $5,000, a figure that few of us believed could be presented. This quote occurred in the first days of November of this year, reaching a maximum value of $5,061 on November 7. As of this date and up to the analysis date today, November 14, the rate has had a slight decrease of $255, maintaining a current rate of $4,806.

The question that is generated by many is: What is the reason for such behavior? Is it the fault of the policies of the new president? The war between Russia and Ukraine? The winds of global economic recession? In short, many are the questions that are in the market.

To explain the causes of such behavior, some external and internal issues of the country will be addressed.

External factors:

United States interest rates:
One of the main economies in the world, such as the United States, has been presenting a worrying increase in the inflation rate, which is currently at 7.7%, a rate that has remained at high levels during the year 2022. The following is shown said behavior.

Due to this worrisome situation in the country’s economy Led by President Joe Biden, the Federal Reserve (FED), who leads monetary policies, among the main objectives it is in charge of is to achieve stability of the inflation rate approximately at 2%, as this figure is currently much higher, interest rates have been rising, allowing consumption to be restricted.

An opposite effect occurs with the eyes of investors, because the United States offers higher interest rates, any investor in the world finds it attractive to migrate with their capital that is invested in other countries, including investors who are in Colombia, denominated by some like swallow capital, to an economy at a zero country risk rate. Investing in dollars backed by the FED makes it more attractive for any investor, not only because of the support but also because the dollar is a world currency, of world exchange and if you add to that, higher interest rates, capital They decide to abandon investment in emerging economies to do so in the United States, allowing the dollar to revalue or gain more value against other currencies.

Russia and Ukraine War:
Talking about the war between a power like Russia and the country Ukraine, is a subject that for many will be limited to a matter of power, but if it is addressed from the global economic effects that we are all going to experience in the coming months or years, it will become a matter of concern. Faced with this issue, the director of the World Trade Organization (WTO) Ngozi Okonjo-Iweala expressed the following: “Smaller supplies and higher food prices mean that the poor of the world might be forced to do without them.”

This statement is centered on the great dependence that the world has on various basic products of the family basket, fertilizers and energy from these two economies at war, which, by being in this power struggle, has significantly affected production and therefore the export of these goods, progressively generating an increase in their prices worldwide.

Talking about economies dependent on these countries, it is inexcusable not to talk about Europe, which depends significantly on gas imports just as winter approaches, factors that have raised inflation rates from 4.1% the previous year to currently on average by 10.7%, which reflects the increase in the cost of living and an appreciation of the main currency euro against the dollar. Faced with this instability in the economy and what may be coming in the short and long term, investors prefer to migrate their capital to more stable economies and currencies, such as the US economy in its dollar currency.

Current situation China:
The economy of the Asian country of China is the 2nd strongest economy in the world, an economy that according to the World Bank projects a growth of 4.5% for this 2022, a percentage that is below the ambitious figure of the Chinese government itself, which is contemplated of 5.5%, but based on the real context of this economy, growth could only reach 2.2%, things are raising alarms about a possible slowdown in its economy, as a result of the measures that it currently manages in the management of COVID, a possible collapse of the real estate market and the protectionist and authoritarian measures of President XI JINPING against foreign companies.

Faced with this scenario, many European investors are stopping investing in this economy or are migrating to more stable economies or with less stability and guess where this capital is migrating to, it is correct, the United States economy is strengthening the dollar more and more every day against the others foreign exchange.

Internal factors:

Now yes, the incidence that the new government has against this behavior can be addressed, for this it is relevant to focus the opinion on the messages of instability that it can send to an economy, to investors and worldwide, some opinions of a government team confused and uncoordinated in their decisions and statements, for example, one of the strongest and most invested sectors in Colombia is the mining sector, this is the time when it is not clear whether or not there will be more coal, oil and gas exploration.

Additionally, the interventions made by President Petro regarding these issues, such as contradicting the decisions of the Banco de la República regarding inflation control, are messages that, although they may have objectivity and logic, are interpreted by some analysts as irresponsible opinions by not dimensioning the effect in an economy at a time where there is a scared market, with a skyrocketing dollar, the most logical and predicted result is capital flight and therefore devaluation of the peso against the dollar and guess where this capital or the foreign investment. Correct, the North American market.

As can be seen, the fluctuation in the value of the dollar is due not only to internal issues, as misinformation sometimes makes it appear in Colombia, but also to external issues, which is why being informed, knowing how to be informed and knowing how to analyze and interpret, can allow you to give correct opinions. constructive and consistent.

References:
https://es.weforum.org/