Dollar ascends to year high with crypto value test just around the corner

Quick Take

The DXY Index, a measure of the value of the U.S. dollar relative to a basket of foreign currencies, has surged to an apex of 104.6, its loftiest level since March.

This ascendancy exerts significant pressure on global currencies such as the Chinese Yuan (CNY), Japanese Yen (JPY), Euro (EUR), and British Pound (GBP), leading to their weakening. A weakening currency typically incites inflationary pressure, thrusting domestic prices upward and making imports costlier.

While this economic dynamic unfolds, the oil market is not providing respite either. Brent crude oil teeters just below the $89 per barrel mark, and the West Texas Intermediate (WTI) crude oil is priced above $85 per barrel. This persistence of high oil prices compounds the prevailing inflationary pressures.

In this economic landscape, Bitcoin and other ‘risk-on’ assets could encounter growing resistance to upward movement. As traditional safe havens like the dollar increase in strength, the appeal of cryptocurrencies might be tested, thereby making it challenging for such assets to appreciate in value.

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