A stronger dollar and higher Fed rates caused a decline in emerging markets.
18 Nov 2018 at 11:28 AM TASR
BRATISLAVA. A stronger dollar and higher Fed rates caused a decline in emerging markets in the third quarter. The US dollar and US interest rates can only grow to a certain level.
If the US currency does not weaken, this may mean the end of the dollar rule as a global currency. This was said by Saxo Bank forex strategist John Hardy.
Leading the US Dollar
Under the stronger dollar and higher rates, the Turkish lira and the Argentine peso suffered more in the third quarter. The main driver of this development is the US dollar.
"We are moving from the final phase of the US monetary policy cycle to its complete conclusion, all of this is happening faster than the market or the Fed expected," Hardy said.
In the event that the US currency is not weakened, the dollar has denied the debt refusal phase. "First will be the end of the" horror of the dollar "and then an intense search for an alternative to the global menu, which has already begun," Hardy admitted.
Dollar in danger is not yet
However, the position of the dollar as the global currency, according to Tibor Lörincza, an economic analyst at Tatra banka, is not threatened in the short or medium term.
The problem of the global currency is not only the side of the transaction, in which currency the business will be denominated, but also the fact that what can be bought for a particular menu, usually securities and shares.
"The global currency should therefore also allow free movement of capital, there should be a financial and capital market developed in the currency in question, and the economy should be relatively large," said Lörtzz.
Moreover, the global currency has, in its opinion, a predominantly respectable advantage, since they are only the small and comfortable investors worldwide.