With Power Comes Risk

Global Financeeditor Andrea Fiano's letter to you, the reader.

VOL. 36  NO. 7

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The strength of dollar, our cover story this month, is one of the most striking signs of these times. The greenback hit a 20-year-high against most world currencies and saw 10% annual growth in a currency market characterized more by decimal than double-digit variations.

It is the result of interest rates rising in many advanced economies, and most aggressively in the US, but also of other factors. There is the relative strength of the US economy compared to most others and the background of economic turmoil and uncertainty related to the lingering effects of the pandemic and the ongoing war in Ukraine. More than just notching symbolic milestones—like parity with the euro for the first time in 20 years—the soaring dollar is affecting the corporate world. A higher dollar is an advantage for exporters to the US market and US companies importing components. It generally hampers companies exporting or importing from the US to the rest of the world.

What consequences, then, will we see on other currencies and economies, especially developing economies? What about trade? Some effects are already visible, but more will become evident in the coming months. Besides the euro, the British pound and the Japanese yen have also lost heavily against the dollar so far this year. The situation is even worse for the currencies of Hungary, Turkey and Argentina. Borrowing in foreign currencies—a key economic management tool for these economies—has increased exponentially, and with it the cost of financing external debt. Small wonder that more governments are embracing crypto.

Also in this issue: Our annual sub-custodian awards highlight the leading institutions in this key financial services niche for the 20th year. Our second annual sustainable finance awards show clearly how this topic has become more relevant for financial institutions and CFOs, and how much thinking has evolved. Also, our correspondents in the Middle East report extensively on finance in the Gulf, including IPOs, cyberrisk, the rapidly growing fintech sector, and the latest oil boom.

Andrea Fiano | Editor