Major Forex Currencies,US dollar,Forex Forex Education

Which Major Forex Currencies Performed Well In 2022?

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It is no secret that global financial-market volatility has skyrocketed in 2022. Market participants are wondering how things will end with increasing inflation, stock prices plummeting, geopolitical tensions in Eastern Europe persisting, and global energy prices on the rise. With recession levels hitting record highs, many countries are experiencing tighter economic conditions, which has also affected some major forex currencies negatively. Here’s what Forex traders need to know! 

Which Forex Currency has Performed Best so far in 2022?

The United States dollar, shortly USD, reached its highest level since 2000 this year, appreciating 22% against the Yen, 13% against the Euro, and 6% against emerging market currencies since January. The sharp rise in the dollar in recent months has had significant macroeconomic implications for almost all countries, given the dollar’s dominance in international trade and finance. 

The strong US dollar has contributed heavily to the weakness of many emerging market currencies this year as investors flocked to the traditional “safe haven” amid geopolitical and macroeconomic uncertainty. As long as the Fed continues to raise the US interest rates more rapidly than its peers, there is pressure on the currencies of almost all other nations. 

As the US dollar continues to strengthen, it will be possible to purchase more foreign currencies with it than it has ever been in the past. Take the Japanese yen as an example. A year ago, $1 bought about 110 yen. You can now buy about 143 with it. This is one of the largest moves the US dollar has made against another currency, about 30% more. 

What is the impact of the strong US dollar on other economies? 

The weakening of currencies relative to the dollar has made it more difficult for many countries to bring down inflation. The inflation rate is estimated to increase by 1 percent when the dollar appreciates by 10 percent. As a result of their higher import dependency and a greater share of dollar-invoiced imports than advanced economies, these pressures are particularly acute in emerging markets. 

Which Major Forex Currencies Performed Well In 2022?
Source: IMF

Global balance sheets are also being affected by the dollar’s appreciation. It is estimated that approximately half of all cross-border loans and international debt securities are denominated in US dollars. Although emerging market governments are issuing debt in their own currencies, their private corporate sectors owe a large number of dollars.  

Several countries have also seen their financial conditions tighten significantly in light of rising interest rates. Especially for emerging markets and low-income countries, which are already vulnerable to debt distress, a stronger dollar only compounds these pressures.

What Happened to Forex Major Currency Pairs in 2022?

Let’s examine what’s going on with the forex market by analyzing charts for five of the most significant forex major currencies and their pairs. 

1. Euro vs US Dollar (EUR/USD)

Forex major currencies are the most traded currencies across the globe, and EUR/USD is the most traded among all forex pairs. 

Europe’s gas crisis worsened after Russia decided to stop supplying gas through the Nordstream 1 pipeline, causing the Euro (EUR/USD) to fall below parity with the US dollar. The euro is experiencing its worst devaluation in history after falling nearly 16% this year. 

What Happened to Forex Major Currency Pairs in 2022?

Euro (EUR) to US Dollar (USD) Exchange Rate as of 2022:

DateExchange Rate
1 January 2022€1 EUR = $1.1374
15 November 2022€1 EUR = $1.0359

Best Exchange Rate in 2022:

6 Feb 2022€1 EUR = $1.1455

Worst Exchange Rate in 2022:

27 Sep 2022€1 EUR = $0.9589

Average Exchange Rate in 2022:

€1 EUR = $1.0541

The macroeconomic fundamentals of the Eurozone are clearly deteriorating:  

  • Both the Euro Area Manufacturing PMI and the Euro Area Services PMI were already in contractionary territory in August 2022.  
  • Inflation is currently running at 9.1% year on year, which marks a new record high for the annual rate of inflation. 
  • Energy imports have reached a new high, and a global slowdown has slowed exports, leading to a new high balance of trade deficit. 
  • The consumer confidence index remains near an all-time low, which indicates widespread pessimism among households. 

A major factor that contributed to the euro’s fall below parity with the dollar over the summer was soaring natural gas prices in Europe. Specifically, European companies and consumers currently face a big competitive disadvantage compared to US consumers since the wholesale gas benchmark (Dutch TTF) is 8 times higher than US domestic gas prices. 

2. Pound Sterling vs US Dollar (GBP/USD)

GBP/USD is one of the oldest traded major forex currencies, often known as “The Cable”, which describes the British pound versus the US dollar. 

Which Major Forex Currencies Performed Well In 2022? 

In a similar fashion to the euro, the pound (GBP/USD) is also stuck in a major downward trend against the US Dollar. Increasing gas prices in the UK have also worsened the outlook for the sterling, raising inflationary pressures and lowering growth projections, with the Bank of England predicting a recession in the fourth quarter. 

GBP falls to an all-time low against USD in 2022

This September 2022, the British pound plummeted to its lowest level against the US dollar since 1985. Sterling fell to $1.1407 — a level not seen in 37 years — following the U.K.’s darkening economic outlook. The last time sterling fell to $1.14 was in March 2020 and following the Brexit decision in 2016. Sterling has lost more than 15% against the greenback this year. 

US Dollar (USD) to British Pound (GBP) Exchange Rate as of 2022:

DateExchange Rate
1 January 2022$1 USD = £0.739
15 November 2022$1 USD = £0.8414

Best Exchange Rate in 2022:

26 Sep 2022$1 USD =£0.9348

Worst Exchange Rate in 2022:

13 Jan 2022$1 USD = £0.7293

Average Exchange Rate in 2022:

$1 USD = £0.8094

The pound’s weakness is evident in the rapid decline of the UK’s macroeconomic indicators:  

  • In July 2022, the consumer price index (CPI) reached double digit rates (10.1% year over year), the highest level since February 1982. Core inflation is at 6.2% year on year, the highest rate since the series began, excluding energy and food.  
  • According to the Producer Price Index (PPI), the annual rate of inflation has reached 17.1%, the highest level since June 1980. 
  • Consumer confidence in the UK has plummeted to -44 points, the lowest level ever recorded by Gfk. 
  • In the UK, real wages are down 5% year-over-year, the lowest since the first quarter of 2009, while consumer inflation (10.1%) outweighs nominal wage gains (5.1%). 

Despite soaring inflation expectations in the UK, markets have materially repriced BoE’s interest rates. But that hasn’t been enough to boost the pound. Considering what the market is pricing in and how inflation could develop, projected real interest rates are still in deeply negative territory. 

As can be seen on the chart, GBP/USD is headed for 1.141 support (March 2020's low), completing an inverse U-shaped pattern. The pound needs to hold the 1.141 level for its fate, as there is a great deal of fresh air below it. Breaking below this level will take the price back to March 1985, a low of 1.05 (early March 1985). 

3. US Dollar vs Japanese Yen (USD/JPY)

The dollar-yen pair (USD/JPY) has attracted most traders in 2022, as the yen has depreciated sharply against the dollar, losing 17% in the first half of the year. The value of the USD/JPY currency pair depends on the difference in interest rates between the Federal Reserve and the Bank of Japan. 

Which Major Forex Currencies Performed Well In 2022? 

The Japanese yen performed worst among major forex currencies last year. In mid-July, the USD/JPY rallied to 139.4, the highest value since 1998, before losing some steam. There was a brief respite in the yen due to fears of a global recession and the possibility that US inflation had peaked. Despite a wide divergence in monetary policy, the USD/JPY rate has been rising steadily due to the Fed’s aggressive interest rate hikes and the BoJ’s stance of not raising rates. 

A depreciating yen and rising commodity prices have also stressed Japan’s economic fundamentals, though inflation hasn’t risen as sharply as in Europe or the US. In July, the BoJ was the only major central bank not to raise interest rates due to a weakening growth outlook and relatively low inflation (2.6%). 

US Dollar (USD) to Japanese Yen (JPY) Exchange Rate as of 2022:

DateExchange Rate
1 January 2022$1 USD = ¥115.1038
15 November 2022$1 USD = ¥138.8736

Best Exchange Rate in 2022:

20 Oct 2022$1 USD = ¥150.1288

Worst Exchange Rate in 2022:

21 Jan 2022$1 USD = ¥113.6726

Average Exchange Rate in 2022:

$1 USD = ¥130.7526

There will be no trend reversal in USD/JPY as long as the monetary policy gap persists between the Federal Reserve and the Bank of Japan. Although markets bet on a slowdown in Fed rate hikes, the Bank of Japan continues to maintain an ultra-accommodative monetary policy by keeping interest rates at zero. 

Having watched its currency value steadily decline for months, the Japanese government has recently begun making historic moves to prop it up. However, according to some analysts, (despite intervention) the yen will not stabilize until the BOJ reevaluates its monetary policy. 

4. US Dollar vs Swiss Franc (USD/CHF)

Among the other major forex currencies, the USD/CHF currency pair, the “swissie”, is considered to be a safe haven pair, given the neutrality of Switzerland and its stability.  

The Swiss franc (CHF) has performed best among major forex currencies so far in November. Most of the gains have come in the last week due to weaker-than-expected US inflation numbers and hawkish comments from the Swiss National Bank (SNB). 

Which Major Forex Currencies Performed Well In 2022? 

Swiss Franc (CHF) to US Dollar (USD) Exchange Rate as of 2022:

DateExchange Rate
1 January 20221 CHF = $1.0969
15 November 20221 CHF = $1.0604

Best Exchange Rate in 2022:

13 Jan 20221 CHF = $1.0975

Worst Exchange Rate in 2022:

03 Nov 20221 CHF = $0.9868

Average Exchange Rate in 2022:

1 CHF = $1.0455

Inflation in the US fell from 8.2% in September to 7.7% in October, which was less than what the market expected (8%). Dollar prices have fallen as a result of market players cutting their Fed hike forecasts to 50 basis points in December and pricing in a lower terminal rate of 4.85% in May 2023. However, on Friday, November 11, a favorable catalyst for the franc emerged. According to Thomas Jordan, the SNB is ready to take “all measures necessary” to bring inflation back to the 0-2% target. 

As well as that, he stated his willingness to sell foreign exchange reserves, arguing that the current policy stance needs to become more restrictive. CHF rallied against all major peers, gaining 2.3% against the greenback on the day and snapping a six-day winning streak.  

The Swiss franc strengthened by 5.9% against the US dollar (USD), 3.8% against the British pound (GBP), 3.4% against the Canadian dollar (CAD), 1.4% against the euro (EUR), 1.2% against the New Zealand dollar (NZD), 1.2% against the Australian dollar (AUD), and remained unchanged against the Japanese yen (JPY). 

5. Australian Dollar vs US Dollar (AUD/USD)

The Australian dollar (AUD/USD) has been trading down against the US dollar since January 2001. Although it overshot between March and April of 2022, the Australian dollar-US dollar exchange rate has maintained a bearish channel since September 2021. After that, the Australian dollar plummeted 13% against the greenback, reaching its lowest level of the year at 0.668 by mid-July. As AUD/USD reached fresh lows while the indicator rose, the RSI bullish divergence triggered the reversal of the short-term bearish trend. 

Which Major Forex Currencies Performed Well In 2022? 

Australian Dollar (AUD) to US Dollar (USD) Exchange Rate as of 2022:

DateExchange Rate
1 January 20221 AUD = $0.7265
15 November 20221 AUD = $0.6771

Best Exchange Rate in 2022:

5 Apr 20221 AUD = $0.7585

Worst Exchange Rate in 2022:

15 Oct 20221 AUD = $0.6199

Average Exchange Rate in 2022:

1 AUD = $0.6979

During its August 2022 meeting, the Reserve Bank of Australia (RBA) raised its cash rate by 50 basis points to 1.85% to support the Aussie currency. RBA forecasts inflation to be slightly above 7% in 2022 and slightly below 4% in 2023, but not on a fixed path. Global growth prospects are gloomier because of the Ukrainian war and geopolitical tensions between China and the United States over Taiwan. However, supply chain disruptions and a slowing rate of Fed hikes may benefit the Australian dollar.

As of 1 November 2022, the Board has increased the cash rate target by 25 bps to 2.85%. A 25-bps increase in interest rates was also made to Exchange Settlement balances. Inflation in Australia is too high, as in most other countries. It was the highest inflation rate in more than three decades over the year to September, at 7.3%. A combination of factors has contributed to this high inflation rate, but domestic demand is also playing a role. A more sustainable supply-demand balance is necessary to return inflation to target. 

Interest rates have increased materially since May. It was necessary to achieve a more sustainable balance between demand and supply in the Australian economy to reduce inflation. It is expected that interest rates will rise further in the near future. Household spending, wage, and price-setting behavior are closely monitored. Future interest rate increases will be determined by incoming data and the Board’s assessment of inflation and labor market conditions. In order to achieve this goal, the Board will do whatever it takes. 

What are the Most traded Forex Currency Pairs in 2022? 

The findings of a survey indicate that, among the 7 major forex currencies, EUR/USD is the most traded with 39% of all transactions, USD/JPY is next with 21%, GBP/USD is 15%, and AUD/USD is 10%. The EUR/USD pair has one of the highest volumes of trading, which means that traders have more opportunities to profit from it. 

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