As if the energy crisis and the highest inflation rates in four decades were not disruptive enough, the global economy is also being rattled by big realignments in exchange rates. After two decades of being stronger than the dollar, the euro is now at parity with the greenback. Last week, sterling fell to its lowest level against the dollar since 1985 — and many analysts expect it to fall further. The yen, meanwhile, has continued its precipitous slide against the dollar, and is set for its worst year on record.
One part of this story follows a familiar pattern: in times of trouble, currency traders and investors flock to the dollar as a safe haven. That was true even in the 2008 global financial crisis, when the US’s own financial collapse was the epicentre. Right now a multitude of factors are driving demand for the security of US assets: the war in Ukraine, Europe’s energy crisis, and precariousness over how some…
