Is The Sharp Rise In Dollar Going To Affect Other Currencies

Since the beginning of 2022, and in light of the continued tightening of the monetary policy by the US Federal Reserve and its continued raising of interest rates, the dollar has shown a sharp rise until it reached its highest level in 20 years, at a time when the exchange rates of many major currencies around the world fell against the green currency, including the Euro, the British pound, the Chinese yuan and the Japanese yen.

Here, the question is about the impact of the decline in the currencies of industrialized countries on the prices of their products, and the extent to which Kuwait, as an importing market, benefited from that decline, and if there is any impact on the prices of European and Asian products locally, reports a local Arabic daily.

At the outset, it must be pointed out that the depreciation of a currency is not an absolute evil for any country, as it is often beneficial in terms of the competitiveness of the goods it produces, which was confirmed by China when it resorted to devaluing the yuan, for the price of a cheap currency means cheap exports, which increases the competitiveness of the country’s products and raises demand for it in foreign markets.

As for the importing markets for the products of countries whose exchange rates have declined, this is supposed to reduce the cost of importing them, which would be reflected in a decrease in the final prices at which those products are sold to the consumer. Is this what happened in Kuwait?

Al-Rai polled the views of a number of car dealership officials in Kuwait, as an example to determine the extent to which consumer markets were affected locally by the decline in the currencies of many exporting countries, as their expectations varied between rising and falling prices.

In this context, Chairman of the Board of Directors of Al-Khalid Auto Company, Khaled Al-Khaled, said that the automotive sector in the Kuwaiti market is greatly affected by the change in foreign exchange rates against the dollar, and the continuous increase in interest rates in recent months, expecting that the sector will witness a decrease in prices.

Al-Khaled explained that the decrease in car prices will vary according to their source, indicating that it will range from 5% to about 20%, including spare parts and the prices of new vehicles, among others.

As for the general manager of Al Zayani Motors, Muhammad Doula, he confirmed that the decline in the euro exchange rate against the dollar did not have a significant impact on the prices of European vehicles in the local market, such as “Ferrari” and “Maserati” and others, because companies in general pay for the cars they import for local market consumption in dollars, indicating that it is the rise or fall of the US currency that affects the prices of companies.

For his part, Director of Sales and Marketing at Acura Al Mulla, Louay Mustafa, explained that the prices of Japanese cars have witnessed stability recently, pointing out that the Japanese yen has maintained its value against the US currency, which helped Japanese companies to stabilize their prices.

Foreign trade statistics showed that Kuwait imported goods worth 9.61 billion dinars in 2021 from 15 countries, led by China with 1.72 billion, America with 768.7 million, Japan with 554 million, Germany with 424.1 million, the United Kingdom with 228.72 million, and Turkey with 227 .75 million, France with 217.42 million, and Switzerland with 215.28 million dinars.

As for Kuwait’s non-oil exports, the UAE had the largest share, importing approximately 243 million dinars, while Saudi Arabia came next with 219.65 million, followed by China with 215 million dinars.

Kuwait exported to India last year with about 211.7 million dinars and to Iraq with 152.3 million, while Pakistan came after exports amounting to 94.16 million dinars.

According to the statistics, the value of Kuwait’s exports to Qatar reached 84.33 million dinars, 44 million dinars to the Sultanate of Oman, 39 million dinars to Jordan, 25.5 million to Singapore, 23.52 million to Egypt, 21.1 million to Portugal, 19.95 million to Turkey, and 17.3 million to Turkey, one million for Bahrain, and about 17 million dinars for Malaysia.

With Kuwait enjoying a strong exchange rate for the dinar (the most expensive currency in the world), the decline in the exchange rates of currencies such as the euro, the pound sterling, the yen and the yuan is reflected positively in terms of reducing the cost of imported products from countries whose currencies have fallen, while the rise of the dollar means an increase in revenues in the country’s most important exports, except It is oil, as a Kuwaiti barrel is sold in US currency.

 

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