Strong U.S. dollar causes serious problems to low-, middle-income countries: Foreign Affairs
According to a mid-October article in Foreign Affairs, the ascent of the U.S. dollar has made it even more difficult for many low- and middle-income countries to sustain their debt, forcing them to diversify their reserve currencies.
Strong U.S. dollar causes serious problems to low-, middle-income countries: Foreign Affairs
According to a mid-October article in Foreign Affairs, the ascent of the U.S. dollar has made it even more difficult for many low- and middle-income countries to sustain their debt, forcing them to diversify their reserve currencies.
According to the paper, the dollar “is everyone’s problem, to borrow an adage from John Connally, the former U.S. Treasury secretary.”
The majority of these nations’ corporate debt held by foreign investors is in dollars. When the dollar is strong, it costs more to service and repay this loan, according to the report.
It added that a decline in the exchange rate against the dollar could result in issues “even when external debt is in local currency.”
In a vicious cycle, the value of foreign currencies is further depressed as U.S. financial institutions pull out of emerging-market assets after realizing they are vulnerable to losses on those overseas investments.
