Stronger US dollar increases debt burden on emerging economies
Since assuming office, US President Donald Trump has been repeatedly accusing China of currency manipulation, regardless of whether the RMB rises or falls. And lately, expectation about interest rate rises by the US Federal Reserve has made the US dollar stronger against many other currencies.
[Photo: IC]
"Labeling China as the currency manipulator is US propaganda campaign to gain more bargaining chips in the upcoming negotiations," said Professor John Gong from University of International Business and Economics, adding that the US has accused China on this issue many times, but the Secretary of Treasure didn't officially put it into laws.
"The major factor [behind the stronger US dollar] is the increase of interest rate. When the interest rate in the US goes up, it encourages people to move money into the US dollars and take advantage of higher interest rate," said Paul Gillis, a professor of practice at Peking University.
Gillis added that as for the emerging markets, the biggest concern of US dollar getting back to the US is the mounting debt. The debt is becoming more valuable than local currencies. Some companies may have troubles meeting their debt requirements because they are earning the depreciated local currencies and the debt remains as the US dollar, according to Gillis.