The U.S. Dollar Index (DXY) made further large gains in the second quarter, as the war in Ukraine hit energy-import-dependent economies in Europe and Asia. The dollar also benefited from a hawkish Federal Reserve and perceived safe-haven demand as risk markets stumbled.
Emerging market (EM) currencies also struggled after a firmer start to 2022, damaged by the slowdown in China as well as the Russia-Ukraine war. Commodity exporters held up better than most, but few EM currencies could oppose the stronger U.S. dollar trend.
The euro extended its fall in the second quarter, as soaring fuel prices hit the energy-dependent economies with a stagflationary shock. Losses were pared as the European Central Bank prepared to raise rates back to positive territory, but the euro’s weaker tone persisted.
The yen’s relative stability in early 2022 gave way to a sharp collapse, driven by Japan’s extreme dependence on imported energy, a Chinese slowdown, and widening rate gaps as the Bank of Japan showed no sign of raising rates.
EM currencies were generally weaker in the second quarter, as the negative impact slowing global growth and the impact of the Russia-Ukraine war overlapped. The sharp weakening of the Chinese yuan, in response to COVID-19 lockdowns in the economy, undermined a previously firm anchor to EM currency indexes.
With the U.S. 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 continue to 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, No, May 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 create.
In between the Cover and the General Disclosures 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.
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.
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 single slide.