Dollar: pros and cons of its volatility in the first semester

He American dollarthe benchmark currency in the world market, has had a rather turbulent 2023 in terms of its price.

Despite the fact that the currency is known for having aggressive movements with respect to its value in emerging markets (like the Colombian), it has been the downward trend that has marked the currency the most at the end of the first half of 2023, trading below the barrier of 4,200 Colombian pesos at the end of June.

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The aggressiveness of the dollar can be seen from different angles and its behavior can positively and negatively influence the economy of a country, this taking into account the conditions in which the market is found.

As explained María Camila Gómez, country manager of Global66 Colombiathe volatility of the US currency can mean an opportunity for economic growth or an obstacle to it.

(The peso appreciated 13.15% against the dollar in the first half of 2023).

“The volatility of the dollar presents both opportunities and obstacles for users. On the one hand, fluctuations in the exchange rate can provide the possibility of taking advantage of favorable movements and making profits. On the other hand, the high volatility of these fluctuations can generate uncertainty and risks, especially for those who have exposure to the dollar, such as importers and exporters.“, he mentioned.

Taking the individual economy of Colombians as the central axis, the expert mentions that the volatility of the dollar will inevitably have a direct or collateral effect on people’s personal finances.

(Is it a good time to invest in euros in Colombia?).

“When the dollar strengthens against the Colombian peso, imported products tend to become more expensive, which could lead to an increase in the prices of goods and services in the country. Those who have debt denominated in dollars will also see their financial obligations increased“.

The expert also mentioned people who already have financial movements in dollars, explaining that the value of the currency is what determines the maneuverability of its use in the countryeither directly through currency exchange or through remittances.

(The dollar ended June with losses and consolidating below $4,200).

“If the dollar depreciates against the Colombian peso, those who receive remittances in this currency or plan to travel abroad will benefit, since their dollars will yield more in terms of Colombian pesos.“, he added.

Dollar.

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The currency, at least so far in 2023, It has presented sudden movements in its price, tending strong increases and relapses week by week.

(Investing in dollars: what are the risks with the currency).

According to Gómez, this is mainly due to factors such as the monetary policies of the countries, as well as the economic and political events that occur, whether at the national or international level.

“Regarding the high volatility that we observe in Colombia, these elements combined with the complexity of the market, can generate abrupt movements in the exchange rate; especially given the local socio-political situation that continues to generate uncertainty“, he explained.

According to the expert, the purchase and sale of dollars is conditioned by the personal needs and objectives of the person who wishes to operate with this currency: “It is important to consider factors such as personal financial stability, long-term goals, and risk aversion.“, he pointed out.

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