“It’s been a challenging environment,” said William Jackson, chief emerging markets economist at Capital Economics. Why the ‘dollar smile’ leads to frownsThe US dollar tends to climb in value when America’s economy is very strong, or, somewhat counterintuitively, when it’s weak and the world is facing a recession. The government drained its foreign reserves, which were already low in part due to a slump in tourism during the pandemic. There is also a risk that turmoil in emerging markets could spread across the financial ecosystem, triggering a wide range of spillover effects. If these engines of growth really begin to stall, then emerging markets could see a painful outflow of investment.

Source: CNN August 07, 2022 21:49 UTC