The U.S. dollar saw its biggest surge in two years, with a notable rally following the results of the U.S. presidential election, as investors’ bets on Donald Trump’s return to the White House came to fruition. The U.S. currency strengthened significantly against the euro, yen and pound, leading to a dramatic decline in the euro’s value, which fell nearly 200 points from 1.09 to 1.07.
On the day following the election, the dollar index rose by 1.4%, marking its largest single-day increase since November 2022. The pound dropped 1% to $1.291, while the euro fell 1.6% to $1.076. Currency traders have started shifting their positions against the euro, with Trump’s victory seen as increasing the likelihood of aggressive interest rate cuts in the Eurozone—moves that could push the euro closer to parity with the dollar.
Earlier this year, Morgan Stanley predicted that the euro would fall by 7% against the dollar by the end of 2024, citing the European Central Bank’s (ECB) expected interest rate cuts as part of efforts to address economic stagnation in the Eurozone.
Impact on Serbia’s currency and economy: Expert insights
Professor Dr. Ismail Musabegović, an economist at the Belgrade Banking Academy, explained the implications of this currency fluctuation for Serbia’s economy and currency market. He emphasized that the recent rise in the dollar is largely a short-term reaction to U.S. election results and will not have a significant direct impact on Serbian citizens. The fluctuating exchange rate between the dollar and the euro is a natural cycle, driven by the economic conditions in both Europe and the U.S., he noted.
“This rise in the dollar is just a temporary consequence of the U.S. elections, and it generally won’t affect the daily lives of citizens. The relationship between the dollar and euro fluctuates based on the state of the economy in both regions, and it follows a floating exchange rate,” Musabegović explained. He added that the stability of the dinar remains the key factor for Serbian citizens, as the National Bank of Serbia works to maintain currency stability.
According to Musabegović, while a strengthening dollar may have some impact on Serbia’s foreign trade, it won’t significantly affect domestic prices or citizens directly. “If the dollar strengthens substantially, the prices of commodities like oil and wheat, which are traded internationally, may increase. However, the market will adjust depending on supply and demand,” he said.
As for Serbia’s foreign debt, Musabegović highlighted that it is primarily denominated in euros, so the recent fluctuations in the dollar-euro exchange rate won’t have a major impact on Serbia’s debt obligations.
In conclusion, while the rise in the dollar could have some indirect effects on Serbia’s trade and commodity prices, the country’s overall economic stability remains intact, with the National Bank of Serbia playing a key role in managing the currency’s value.
