Eight months of the war and dollar apparently wins
Wojciech R. Bolanowski, MD PhD
Chief AI Officer, retail and digital banking, payments and fintech in EU, GCC, SEA, enthusiast of cross-border banking
October 24th – exactly eight months ago the invasion of Russia to Ukrainian territory (performed from previously annexed parts of Ukraine) began. Since then the conflict went through several phases and its dynamics impacted not only involved countries, but also their neighbors, global economy, financial markets, and approach to climate change challenges. The rising prices of energy, especially in Europe, made some champions of green energy less determined to execute accelerated agenda of oil and coal replacement. The shortages in crop exports and anxiety about next season harvest created immediate jump of food prices and turbulences in markets dependent of Ukrainian and Russian wheat, corn, and fertilizers. Investors had tough time to decide where to move their assets to protect them as much as possible and the other global shocks did not help them at all. The rapid cooling of sentiment for cryptoassets, price protective OPEC+ decisions, crumbling of British politics, expected continuation of Chinese leadership rule, rise of inflation leading to higher central bank rates, and Iranian social issues are just examples. Traditionally, we would see the gold gaining a value as a safe haven for asset, but it is not a case. On contrary, we see US Dollar as the leader of value growth, at least for now. I’ve been monitoring performance of gold, Euro, Bitcoin and Z?oty in relation to American Dollar since the beginning of the war. Links to monthly updates are provided at the end of the text. Now, let’s briefly look at last month’s trends
What happened in October 2022?
The shortest answer is: in month’s framework – not much. Generally, assets regained a bit of their value against the dollar, but that correction seems minor and did not pretend to form any substantial upward trend. Euro grew more than gold, Z?oty and Bitcoin, but that difference was not impressive. Assets are finding equilibrium on the levels very different from those before the outbreak of the war. All those levels are much lower than in Fabruary, which makes US Dollar the strongest asset in the monitored bucket. However, detailed observation shows that the month was quite turbulent and uneasy. The first week of October was a period of substantial strenghtening for US Dollar against other assets. Especially Bitcoin were pushed to the bottom of its long lasting horizontal channel, however resisting further fail. British Pound got heavy impact and although the asset is not on my monitoring list I must mention that. At the end of September GBP was quoted with almost 1:1 parity to USD. The second half of the period brought the reverse trend, which can be also described as general weakening of American currency. All assets made up the previous loss and their price on October 24th is higher than a month ago. Yet, as I mentioned, this change is nothing significant and requires more time to be actually acknowledged, at least for mid-term.
Some astonishing facts
Stabilized prices of assets are still far from the reality we lived in before the war. In a nutshell:
Euro costs less than Dollar and the situation seems to be a new norm on FX market. This have not happened for twenty years. British Pound reached its new minimum not only against Dollar, but oither currencies. Gold failed to prove being the asset of choice in the turbulent time of war. Last, but not least, Bitcoin got frozen on the level of end-of-2017 record and the cryptoasset market entered the period of disappointment. Some experts already labeled the upcoming season as cryptowinter.
From that perspective US Dollar is apparently winning this race, but whether it is a result of the war or rather effect of Federal Reserve’s creative policies is not the question I am capable to answer.
How does in look in monthly intervals, asset-by-asset
The table below present monthly performance of the selected assets during the war, that is since Fabruary 24, 2022:
Average prices of selected asset in US Dollars, the average market price for 00:00 UTC of specific days; source: xe.com charts.
The monthly briefings about asset performance since the beginning of the war are available here:
Summary of September 24th:
Summary of August 24th:
Summary of July 24th:
Summary of June 24th:
Summary of May 24th:
Summary of April 24th:
Summary of March 24th: