USD the most expensive in 20 years. The dollar index has hit a record since 2002.

The US dollar index hit its highest level since 2002. There is currently no one among the world's major currencies that appreciates against the USD from the beginning of the year.

The Japanese yen suffered the biggest losses - 11 percent. British pound and euro from the beginning of the year to the end of April, they lost approx. 7,4 percent. The Swiss franc weakened at that time by nearly 6 percent, and the New Zealand dollar by about 4,7 percent. It seems that due to the increase in commodity prices, the so-called commodity currencies, i.e. the Australian and Canadian dollars - 1,6 and 0,8 percent, respectively.

Strong arguments of the US currency

Russia's attack on Ukraine has caused geopolitical uncertainty around the world. The West sided with the defending Ukraine and is trying to bite the aggressor with economic sanctions. This environment is favorable for the so-called safe havens in the investor's market, and the dollar certainly belongs to them. Another factor that can drive up the USD is action Federal Reserve. The world's largest central bank is fighting inflation by raising interest rates. Currently, their level is 0,25-0,5%, but according to investors' estimates and expectations, after successive increases in the following months, at the end of the year it could increase to 2,75-3,0%.

Will the dollar rate withstand this pace?

Expectations based on fed funds futures assume interest rate hikes in the US: by 50 basis points in May, by 75 basis points in June, 50 basis points in July and by 25 points in September, November and December.

The implementation of such a scenario would mean a huge growth in the cost of money in the US. This may raise a debate as to whether such a swift action by the Fed will prove to be risky for the US economy. Anyway, on May 4 we will get to know another decision of the US central bank on the level of interest rate hikes.

For the US dollar, it may also be a kind of test. The 20-year record before the real cycle of interest rate hikes in the US begins raises the question of whether the USD can maintain this pace and continue to grow stronger?