Dollar hegemony could spark a new crisis
3 years, 7 months ago

Dollar hegemony could spark a new crisis

China Daily  

MA XUEJING/CHINA DAILY Editor's Note: The United States government has implemented huge economic stimulus measures. With fears of stagnation in the US rising, especially after lower than expected job creation and consumption growth in April, the Federal Reserve has proposed a new monetary policy, reverting interest rates to zero and resorting to unlimited quantitative easing, as it had done when the 2008 global financial crisis broke out. The huge liquidity released by the Fed has already impacted the global financial market, not only causing the depreciation of the US dollar and creating panic in the market, but also triggering a new exchange rate competition, which could lead to a new economic crisis. But the Fed's aggressive interest rate cuts and unlimited quantitative easing policy have released huge amounts of dollars in the foreign exchange market, causing the dollar index to fall from a high of 102 in March 2020 to below 90 in January this year－a depreciation of more than 10 percent. And the Fed's "fall-to-the-bottom" interest rate policy has significantly reduced the space for monetary policy adjustments in the future, further lowering market expectations on the dollar.

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History of this topic

Trump vows to defend U.S. dollar hegemony, but is it under threat?
1 month, 1 week ago

Trump vows to defend U.S. dollar hegemony, but is it under threat?

Raw Story  

U.S. President-elect Donald Trump has threatened retaliation against governments that challenge the US dollar, vowing "100 percent tariffs" on countries that undercut the US currency. "The US dollar remains as dominant as ever as a global funding currency, a payment currency for international transactions, and a reserve currency," said Eswar Prasad, a professor of international trade policy at Cornell University …

America’s strengthening dollar will rattle the rest of the world
2 months ago

America’s strengthening dollar will rattle the rest of the world

Live Mint  

In 1971 John Connally, then the American treasury secretary, told his European counterparts that the dollar was “our currency, but your problem". Over the following half-century the global economy has transformed, but Connally’s adage still rings true: even though the value of the dollar remains largely set by domestic developments in America, its swings almost always send ripples across the …

Dollar’s Resurgence Is a Headache for the Rest of the World
1 year, 3 months ago

Dollar’s Resurgence Is a Headache for the Rest of the World

Live Mint  

The dollar bounced back with a vengeance in the third quarter, threatening global central bankers’ tricky task of bringing down inflation while protecting fragile economic growth. “The markets have consistently tried to price in rosy scenarios which were associated with a weaker dollar and they continue to be surprised that the reality isn’t quite as rosy,” said Maurice Obstfeld, former …

The world seems headed for a mild output contraction
1 year, 6 months ago

The world seems headed for a mild output contraction

Live Mint  

There are currently four scenarios for the global economic outlook. The most positive is a ‘soft landing,’ where central banks in advanced economies manage to bring inflation down to their 2% targets without triggering a recession. If the effort to tame inflation triggers severe economic and financial instability, a fourth scenario becomes possible: central banks wimp out and allow for …

OECD forecast: High rates, inflation to slow world growth
2 years, 1 month ago

OECD forecast: High rates, inflation to slow world growth

Associated Press  

Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023. Inflation — largely fueled by high energy prices — “has become broad-based and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support …

World economy to grow 3.1% this year, down from 5.9% : OECD
2 years, 1 month ago

World economy to grow 3.1% this year, down from 5.9% : OECD

Al Jazeera  

While not predicting a global recession, the OECD said it was ‘a very, very challenging outlook’ for this year and next. Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023. In the OECD’s estimation, the world …

America’s interest rate must not work against the world’s interest
2 years, 2 months ago

America’s interest rate must not work against the world’s interest

Live Mint  

Last month, this column had argued that monetary policy in the US, which has raised interest rates sharply over six months, is not likely to curb inflation but is surely risking a recession. Thus, a stronger dollar is the immediate outcome of higher interest rates in the US, which attract finance capital from everywhere, while risk averse investors are induced …

‘Bad situation’: Soaring US dollar spreads pain worldwide
2 years, 2 months ago

‘Bad situation’: Soaring US dollar spreads pain worldwide

Associated Press  

The cost of living in Cairo has soared so much that security guard Mustafa Gamal had to send his wife and year-old daughter to live with his parents in a village 70 miles south of the Egyptian capital to save money. “A strong dollar makes a bad situation worse in the rest of the world,’’ says Eswar Prasad, a professor …

‘Bad situation’: Soaring U.S. dollar spreads pain worldwide
2 years, 2 months ago

‘Bad situation’: Soaring U.S. dollar spreads pain worldwide

The Independent  

For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails Sign up to our free breaking news emails Sign up to our free breaking news emails SIGN UP I would like to be emailed about offers, events and updates from The Independent. An auto parts dealer in Nairobi, a seller of …

‘Bad situation’: Soaring U.S. dollar spreads pain worldwide
2 years, 2 months ago

‘Bad situation’: Soaring U.S. dollar spreads pain worldwide

LA Times  

Workers wait for customers outside a car parts shop in Kenya’s capital, Nairobi, Kenya. “A strong dollar makes a bad situation worse in the rest of the world,’’ says Eswar Prasad, a professor of trade policy at Cornell University. The pound recently flirted with dollar parity after Britain’s new prime minister, Liz Truss, announced huge tax cuts that roiled financial …

Brainard warns US rates to stay high, notes global impact
2 years, 3 months ago

Brainard warns US rates to stay high, notes global impact

Associated Press  

WASHINGTON — Federal Reserve Vice Chair Lael Brainard said Friday that U.S. interest rates will likely have to remain high for an extended period to combat inflation, capping a week of tough rhetoric by Fed officials. Interest rates will need to stay high “for some time to have confidence that inflation is moving back” to the Fed’s 2% target, Brainard …

Dollar’s rise spells trouble for global economies
2 years, 3 months ago

Dollar’s rise spells trouble for global economies

Live Mint  

The U.S. dollar is experiencing a once-in-a-generation rally. “It’s not going to be contained.” A stronger dollar makes the debts that emerging-market governments and companies have taken out in U.S. dollars more expensive to pay back. “Whether the ECB turns more hawkish, whether there’s some improvement on the economic outlook, whatever happens, it’s generally offset by further dollar strength,” he …

Explained | What will be the impact of euro-dollar parity?
2 years, 5 months ago

Explained | What will be the impact of euro-dollar parity?

The Hindu  

The story so far: The euro and the U.S. dollar reached parity on Tuesday, meaning one dollar could buy one euro in the foreign exchange market. Analysts believe that the divergence in the monetary policies of the U.S. Federal Reserve and the European Central Bank is the primary reason behind the euro’s significant depreciation against the U.S. dollar. The U.S. …

US monetary policy harms global economy
2 years, 9 months ago

US monetary policy harms global economy

China Daily  

US Federal Reserve in Washington DC. Second, the Fed's interest rate hike is likely to trigger a financial crisis in emerging economies, as it will lead to the devaluation of emerging economies' currencies, thereby increasing their external debt burden. Third, interest rate hikes by the Fed will exacerbate debt risks in emerging economies whose foreign debt repayment peaks in 2022 …

Dollar hegemony could spark a new crisis
3 years, 7 months ago

Dollar hegemony could spark a new crisis

China Daily  

MA XUEJING/CHINA DAILY Editor's Note: The United States government has implemented huge economic stimulus measures. With fears of stagnation in the US rising, especially after lower than expected job creation and consumption growth in April, the Federal Reserve has proposed a new monetary policy, reverting interest rates to zero and resorting to unlimited quantitative easing, as it had done when …

The Fed keeps rates near zero and acknowledges fragile recovery
4 years ago

The Fed keeps rates near zero and acknowledges fragile recovery

CNN  

New York CNN Business — The Federal Reserve, as widely expected, left its key short-term interest rate near zero following its latest policy meeting Wednesday. Powell pointed out in the press conference that the path of the overall economy remains “highly uncertain,” though he noted that the housing market has “fully recovered.” “With vaccines on the horizon, the Fed’s economic …

Is US dollar’s reign as world’s reserve currency is under threat?
4 years, 5 months ago

Is US dollar’s reign as world’s reserve currency is under threat?

Live Mint  

The dollar’s rise to become the dominant currency started after World War I, but it was only definitively confirmed by the Bretton Woods accord reached in 1944. Wider use of SDRs as a reserve currency would reduce developing economies’ need for foreign exchange reserves as “self-insurance.” SDRs became a go-to reserve asset when the dollar fell 34% vs. the yen …

Federal Reserve cuts rates to zero to support the economy during the coronavirus pandemic
4 years, 10 months ago

Federal Reserve cuts rates to zero to support the economy during the coronavirus pandemic

CNN  

New York CNN Business — In a bold, emergency action to support the economy during the coronavirus pandemic, the Federal Reserve on Sunday announced it would cut its target interest rate near zero. “They’re very concerned the financial markets won’t work.” The US stock market tumbled into a bear market this past week – the first in 11 years – …

Interest rates are going down, but how low can they go?
5 years, 6 months ago

Interest rates are going down, but how low can they go?

ABC  

Just how low can they go? Key points: Markets expect more rate cuts from US Federal Reserve, perhaps starting this week Growing number of economists expect RBA will cut to 0.5pc Oil market delicately balanced between falling demand and supply concerns over renewed US/Iran tensions The US Federal Reserve's Open Market Committee meets this week and may knock rates down …

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