After rising in late 2021, the U.S. Dollar Index (DXY) showed signs of topping out early in the first quarter, as even the European Central Bank (ECB) appeared ready to raise rates. However, the war in Ukraine ensured another leg higher for the dollar against developed market currencies.
Despite a firm start to 2022, emerging market (EM) currencies were damaged by the Russian invasion of Ukraine, with only the Chinese yuan and a few Latin-American currencies holding up in the face of the perceived stagflationary hit to global growth.
The euro initially stabilized in the first quarter, as persistent high inflation obliged the ECB to discuss ending bond purchases and tightening policy as early as this year. However, since Europe will likely be worst-hit by the stagflationary shock of the Russia-Ukraine war and soaring energy prices, the euro’s decline has resumed.
The yen has been more stable, even as Japan’s economy is extremely dependent on imported energy and as the Bank of Japan shows no sign of raising rates. The yen’s reputation as a perceived safe-haven currency has provided some offsetting support to these weaknesses.
EM currency indexes rose at the start of the year as the dollar’s rise stalled, and with many EM countries already well-advanced in their rate-rise cycles. However, the negative impact on global growth and trade, as well as the direct impact on European currencies, meant that the Russian invasion of Ukraine in February sent most EM currencies lower once more.
With the dollar expected to remain firm against developed market currencies and the stagflationary impact of Russia’s actions and subsequent sanctions likely to persist, many EM currencies may struggle in 2022.
Wells Fargo Investment Institute (WFII)
Individual Market Charts For use With; Clients and Prospects
INSTRUCTIONS ON ASSEMBLING AN INDIVIDUAL MARKET CHART PRESENTATION
The first page of the presentation must be the Market Chartbook Cover page (Market Charts:
Turning Data into Knowledge) which includes the retail non-deposit investment product
(RNDIP)/Not, May, Not disclosure. Chartbook data is updated quarterly. Please check the
effective date on the Cover page to be sure you are assembling the most recent information
available. In Digital Market Charts, this is automatically added as the opening page of
any collection you create.
The final page must be the General Disclosure page which identifies Global Investment Strategy
as a division of WFII and Wells Fargo Advisors as the broker-dealer. In Digital Market
Charts, this is automatically added as the closing page of any collection you
In between the Cover and the General Disclosure pages you may include any individual chart(s)
you decide upon. If a chart contains a separate disclosure page, that page will automatically
accompany the particular chart chosen. For example, if you wish to include the Fixed Income
Scorecard as one of your selected charts, it will automatically be accompanied by the
disclosures on the following page.
For WFA users, after assembling, submit to your Qualified Supervisor for review and approval in compliance with the Communication Compliance Submission process as outlined in your LOB’s CAR Guide. Slides used without alteration and with the proper disclosures need Qualified Supervisor review. They don’t need to go through CAR. For users in other LOBs please follow your LOB review process.
If printed, the chart slides must be printed one per page to ensure that disclosures on the
slides are legible. These pre-approved slides may not be altered in any way or combined onto a