Friday, December 9, 2016

These Countries Will Be Impacted The Most From A Strong U.S. Dollar

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Stratfor: Where a Strong Dollar Will Do the Most Damage

Forecasting the future of currencies is a notoriously risky business. Forces may push them in a particular direction, as is currently the case with the dollar, but in the ever-changing environment of the foreign exchange market, events anywhere in the world, at any point in time, can alter their course. Nevertheless, the dollar is steadily strengthening, and it could create headaches in other parts of the world.

One of the biggest victims will be China. The Chinese yuan has been devaluing against the dollar for the past 18 months, a process that in itself leads to capital flight as investors try to flee the depreciating currency. This carries the risk of becoming a disorderly process, and China has spent a considerable share of its foreign exchange reserves trying to manage it. A strengthening dollar will put more pressure on China to burn through its remaining reserves even faster, eating away at the safety net it has built up over the past two decades.

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WNU Editor: In a normal world a strong U.S. dollar will mean a rise in exports to the U.S. because of their low costs .... and a subsequent depreciating of the dollar as more dollars go overseas to pay of these imports. But President-Elect Trump has made it clear that he will not tolerate American jobs going overseas, and he has eye on cutting the massive U.S. trade deficit via through tariffs.. If I was a currency trader .... and if I believe that President-Elect Trump will do what he has promised .... I will be betting heavily in favour that the U.S. dollar is going to rise even more. As for those countries that are impacted the most by a strong U.S. dollar .... tough times are ahead.

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