The dollar - the best performing major currency in the last decade

Monetary policy, geopolitical events and economic conditions - among other factors - significantly influence developments in the foreign exchange market, and the US dollar (USD) was the best-performing currency in the last decade (2014-2023), according to an analysis published by visualcapitalist .com, based on OANDA data.

According to the cited source, the dollar has taken first place in six of the last ten years in terms of performance. Relatively stable US economic activity and the dollar's role as an international reserve currency have sustained its strength.

The dollar is also a safe investment during times of crisis, meaning investors will often place money in the US currency during periods of instability, such as the 2014-2016 "price shock" oil".

After the Covid-19 pandemic, the dollar hit an all-time high in 2022 in response to aggressive interest rate hikes, but has weakened in 2023. At the same time, the failure to push through health and tax reforms has led to a decline in the US currency, in 2017 (in the mandate of Republican Donald Trump). In 2020, low interest rates in the US and difficulties in combating the pandemic contributed to the depreciation of the US currency by more than 7% that year.

• The Japanese yen, struggling with low interest rates

The Japanese yen has been the worst performing currency of the group of ten over the past decade, ending up at the bottom of the ranking in four years of the ten analyzed.

The long-standing gap between Japanese and US interest rates is largely to blame for this development, according to the source cited.

Higher interest rates typically attract foreign investment, so Japan's ultra-low interest rates, in place since the late 1990s, have discouraged capital inflows, reducing demand for the Japanese currency. This put downward pressure on the yen in favor of the dollar.

• The Canadian dollar and the British pound, in decline

The cited analysis shows that the Canadian dollar (CAD), which has historically had a strong correlation with the price of oil, suffered from the decline in crude oil prices in 2014. However, the link between the CAD and oil has broken in recent years.

At the same time, the pound was hit by the Brexit vote, falling by almost 17% in 2016 to its lowest level in 31 years, as The Guardian notes. Sterling has also underperformed in 2022 following disastrous fiscal policy announcements that led to the resignation of former Prime Minister Liz Truss.

Against the backdrop of economic growth reaching a ten-year high, the euro (the eurozone's single currency) performed exceptionally well in 2017, gaining nearly 14% over the year, according to the analysis cited.