Tags: dollar | debt | emerging | markets

WSJ: Dollar's Jump Creates Debt Woes for Emerging Markets

By    |   Wednesday, 31 December 2014 11:20 AM

The dollar's surge — it hit a seven-year high against the yen and a two-year high against the euro in December — has been highly welcomed by developed nations as a spur for their exports.

But the story is different for emerging markets such as Brazil and Thailand. They issued approximately $1 trillion in dollar-denominated bonds before the dollar rose, The Wall Street Journal reports.

And with the greenback's ascent, interest-rate and principal payments on those bonds are now more expensive in the currencies of these nations.

"The investor community is becoming very much one-way or crowded toward retrenching to the U.S.," Nikolaos Panigirtzoglou, global markets strategist at J.P. Morgan Chase, told The Journal.

The dollar rose about 7 percent in 2014 against a group of currencies tracked by the St. Louis Federal Reserve Bank.

The currency move could spark defaults on some emerging market companies' bonds, analysts tell The Journal.

Shweta Singh, a senior economist at research firm Lombard Street Research, predicts the dollar will keep climbing, as the U.S. economy will continue to strengthen and emerging economies still struggling. Therefore, “the debt burdens of emerging markets will intensify,” she says.

Star investor Jim Rogers is concerned about currency wars.

"Whether it's an intentional war or an accidental war or side effect [of global central bank easing], I don't know, but it's certainly happening," Rogers tells Wall Street Daily.

"Just look around, you see that nearly every currency in the world is down a lot against the U.S. dollar, except the Chinese renminbi."

To be sure, the war may not be intentional, Rogers said. "I don't know if somebody sat around and plotted, 'Let's have a currency war,'" he explained. "They just said, 'What we need to do is print a lot of money,' without realizing it's going to cause currency fluctuations."

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The dollar's surge — it hit a seven-year high against the yen and a two-year high against the euro in December — has been highly welcomed by developed nations as a spur for their exports.
dollar, debt, emerging, markets
302
2014-20-31
Wednesday, 31 December 2014 11:20 AM
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