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BiggerThe unstoppable Dollar, threatens global trade
Santo Domingo.- The DXY Dollar Index has reached yearly highs, which is not good news for global trade. Clearly, the greenback continues to shine in its role as a global safe-haven asset. Furthermore, the resilience of the U.S. economy has also boosted the dollar.
US Treasury yields remain on an upward trend and, as a result, the USD has strengthened. In addition, high government bond yields have had a bearish impact on the U.S. stock market and gold. It is worth noting that the rise of the dollar basically forces global monetary authorities to maintain a hawkish stance.
The US dollar, demand from China and the immediate future of oil prices are three of the main factors that will probably have the greatest impact on inflation in the last few months of 2023.
Impact on emerging markets and the DR
– Favorable news for exports (could be a headwind for commodity exporting countries) and tourism.
– Higher debt servicing costs.
– Capital flight to US safe-haven assets (mainly US Treasuries).
– More expensive imports. That said, the stability of the peso (DOP) absorbs, to a certain extent, the increase in costs.
Despite loose monetary conditions and the challenging global economic outlook, the Dominican peso has remained stable in the first 9 months of this year.
The national currency gained 0.07% against the US dollar (USD) in September of 2023 and has only depreciated 0.8% YTD.
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By Javier Trullols
(Javier Trullols is Economic & Financial Advisor, Financial Markets Analyst and Managing Director @ Invertix.
Twitter (X): @jtrullols102828)
It is hard to believe that a trained economist would write this. The high US dollar makes it extremely difficult for the US exporters but does not affect exporters in other countries . In fact it is advantageous for them. The high US dollar means that US products will be more expensive in the DR but it also means the DR will buy more from other exporters.
Hello Richard:
I literally detailed this in my article.
Impact on emerging markets and the DR
– Favorable news for exports (could be a headwind for commodity exporting countries) and tourism.
– Higher debt servicing costs.
– Capital flight to US safe-haven assets (mainly US Treasuries).
– More expensive imports. That said, the stability of the peso (DOP) absorbs, to a certain extent, the increase in costs.
JT
Well it sure makes american tourism increasingly attractive, Which I thought was an important goal of the Sr.Luis and Sr.David tourism team
Hi Tomas:
Correct.
Best regards,
JT
I would think there is more of a threat to DR’s economic woes coming from U.S treasury rates. As U.S treasury interest rates increase it becomes difficult to unload those non investment grade Dominican junk bonds.
Hi Tomas:
The correlation of the dollar (USD) with treasury yields has been positive and strong during the current policy tightening cycle.
Best regards,
JT
As long as the dollar is currency at the hip of international oil purchases and other commodities, the RD and many other nations are held bound to its necessity. The RD needs dollars.