From Reuters via U.S. News & World Report, May 11:
The Dollar Problem: Emerging Markets Count the Costs
Barely recovered from a two-year bout of COVID, emerging markets now face capital flight, inflation, and even debt defaults as the dollar's run to two-decade highs tightens the screws.
Almost all past emerging market crises were linked to dollar strength. As the dollar rises, developing countries must tighten monetary policy to head off falls in their own currencies. Not doing so would exacerbate inflation and raise the cost of servicing dollar-denominated debt.
For all the improvements of recent decades, those equations still broadly hold and the recent dollar rally is leaving a trail of destruction in its wake.
Soaring commodity prices are another complication, alongside the tumble in China's yuan - an anchor for Asian and commodity currencies."The cracks are widening. When a strong dollar intersects with high commodity prices, it's not strange that we get problems in emerging markets," said Manik Narain, head of emerging markets strategy at UBS.
"And when the yuan weakens there are no winners in EM."CURRENCY CONUNDRUM
Dollar appreciation has pushed an emerging currency index down 3.5% this year to an 18-month trough, though that masks bigger 9%-15% losses on currencies such as Poland's zloty and Turkey's lira. Losses also picked up in April, coinciding with the yuan downturn....
....MUCH MORE
Partly in response we see stories like this at Egypt's Al-Ahram (and deeper in the USNWR piece):
Egypt plans to issue Chinese Yuan-dominated bonds: Finance minister
We wish them well, taking on debt in a currency other than the one you earn your living in can really bite you in the butt.
