The peso is
a currency that has been losing value as the Fed stated that it plans on
raising interest rates this year. A shift in the global economy is affecting
millions of people and as rates continue to rise, it adds momentum to a stream
of money that has been leaving emerging markets and moving toward the US. Foreign economies, which are trying to develop,
are becoming weaker and currencies are falling.
It is almost as families are taking large pay cuts and can afford less
and less and some cannot afford much to begin with. People are starting to leave factories and go
back to their home towns.
Most economist believe that the predicted
rate increases will be far less than expected, but many emerging countries have
created large reserves of dollars in order to protect themselves against a
significant drop in their currencies.
One county that has already seen a significant impact is Turkey. Their currency has dropped 25% against the
dollar since May, and their reserves are low.
It will be interesting to see how this all works itself out. Some countries are vulnerable at the moment
and possible trade wars with the US need to be avoided at all costs.
Link: https://www.nytimes.com/2017/03/16/business/federal-reserve-interest-rates-china-mexico.html?ref=business
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