Why does the dollar rise if interest rates fall? - Personal opinion
Hello friends of Project HOPE, I hope that since it is mid-week, things are progressing well. Today I want to share a topic regarding the value of the American dollar (USD). There is something that has been discussed a lot lately, and it has to do with interest rates, and that this speaks of the cost of getting loans, so the higher it is, the more expensive it is to get loans because you have to pay more interest, it's that simple.
But when the interest rate falls, what we have is a loss in the value of the dollar, at least in theory, which has an impact on the cost of borrowing, and which becomes cheaper, so we must assume that the value of the dollar will fall. Therefore, because more dollars will begin to circulate, and in the same way that when something is abundant it drops in price, this also happens with this currency, but there is a detail here, in general terms the price of the dollar in Colombia has risen, for example. Its value in pesos has risen, why does this happen?.
At this point it is necessary to know that we must consider more things, and not focus solely on what the dollar is, since we are comparing it with other currencies, in this particular case, the price of the dollar against Colombian pesos. So, we have a USD that loses value, but the Colombian peso depreciates much faster than the dollar, for example, and this is what we see, that we now need more Colombian pesos to be able to buy a dollar.
All forms, products of inflation, are losing value, even the dollar, only that the currencies of developing countries do so at a faster rate, and this happens largely thanks to the fact that the dollar is the main currency. reserve of value of most countries, the vast majority of global loans are made in USD, and if this country, as the issuer of this main currency, generates changes in its monetary policy that favor its economy, generally What happens is that it ends up importing its inflation to other countries, especially those that use the dollar as the main reserve of their economy.
That is why some countries, which have formed the so-called BRICS, are working together to stop using the USD, because not only is it about economic dominance, but also the US uses its currency as a weapon to try to subdue countries. that they do not adhere to their policies and to the things that only suit them, which is not good for the independence of any country, logically.
It is particularly trying to understand all this, because whether we like it or not, whether we understand it or not, it ends up affecting us, since we live in countries in which everything that happens in the powers ends up spreading, and often exponentially, to the countries that we inhabit I hope this publication has been of interest to you, greetings.
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