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The rising dollar causes suffering around the world

The rising dollar causes suffering around the world

The rising dollar causes suffering around the world

The rising dollar causes suffering around the world

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  • Financial hardship is being made worse by the strong dollar.
  • Professor Eswar Prasad claims that a strong dollar aggravates already unfavorable conditions elsewhere in the world.
  • The rising dollar causes pain for common goods and services all across the world.
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The rising dollar causes pain for common goods and services all across the world.

Financial hardship is being made worse at a time when families are already experiencing shortages of food and energy due to Russia’s invasion of Ukraine.

Eswar Prasad, a professor of trade policy at Cornell University, claims that a strong dollar aggravates already unfavorable conditions elsewhere in the world.

Numerous experts are concerned that the significant increase in the dollar is raising the possibility of a world recession sometime in 2019.

The benchmark ICE US Dollar Index, which compares the value of the dollar to a basket of important currencies, shows that the dollar is up 18 percent this year and reached a 20-year high last month.

The causes of the dollar’s increase are well known. The Federal Reserve has increased its benchmark short-term interest rate five times this year to counteract the surge in US inflation, and it is indicating that additional increases are expected. As a result, rates on a variety of US corporate and government bonds have increased, enticing investors and strengthening the US dollar.

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Comparatively speaking, most other currencies, particularly in developing nations, are significantly weaker. In relation to the dollar, the Egyptian pound has fallen by 20% this year, the Indian rupee by about 10%, and the Turkish lira by a startling 28%.

In Istanbul, 60-year-old Celal Kaleli sells baby clothes and diaper bags. He has to hike rates for Turkish customers who struggle to pay him in the severely devalued local currency because he needs more lira to purchase imported zippers and liners priced in dollars.

He states, “We’re anticipating the new year. “We’ll review our finances and downsize as necessary. Nothing else that we can do.

Rich nations are not exempt. The UK pound has fallen 18 percent from a year ago, and one euro is worth less than $1 in Europe, which was already on the verge of recession due to skyrocketing oil prices.

Since the new UK Prime Minister Liz Truss announced significant tax cuts that shook financial markets and forced the resignation of her Treasury Secretary, the pound has been flirting with dollar parity.

Many times in the past, fluctuating currencies have hurt economies all around the world. For instance, during the Asian financial crisis in the late 1990s, Indonesian businesses took out large loans in dollars during periods of economic expansion only to lose everything when the value of the Indonesian rupiah fell against the dollar.

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A falling peso caused similar suffering for Mexican consumers and businesses a few years prior.

However, the 2022 dollar increase will be particularly difficult. At a time when prices have already been rising rapidly, it is adding to the strains of global inflation. The war in Ukraine disrupted the energy and agricultural markets, which made the COVID-19 recession and recovery-related supply limitations more severe.

In Manila, 29-year-old jeepney driver Raymond Manaog laments that growing inflationary costs, particularly those of diesel, are making it necessary for him to work longer hours in order to make ends meet.

What we need to do in order to make enough money to cover our everyday needs, he says. “We now traverse our routes six times, as opposed to the five times we used to.”

For decades, Ravindra Mehta has prospered in New Delhi as a middleman for American exporters of almond and pistachio products. But on top of increasing transportation and raw material expenses, the rupee’s record decline has driven up the price of the nuts for Indian customers.

According to Mehta, India imported 400 containers of almonds in August, down from 1,250 containers a year prior.

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“The entire supply chain, including people like me, is impacted if the consumer isn’t buying,” he claims.

One of the largest wine bottlers in the UK, Kingsland Drinks, was already feeling the pinch from rising costs for shipping containers, bottles, caps, and energy.

Now that the dollar is in freefall, it is raising the cost of the wine that it purchases from US vineyards as well as Chilean and Argentinean ones, two nations that, like many others, depend on the dollar for international trade.

Kingsland has contracted to acquire dollars at a specified price in order to offset some of its currency costs. However, according to Ed Baker, managing director of the company, “those hedges run out and you have to reflect the reality of a lower sterling against the US dollar” at some point.

Also Read

US Dollar to PKR – US Dollar rate in Pakistan – 19 Oct, 2022
US Dollar to PKR – US Dollar rate in Pakistan – 19 Oct, 2022

USD TO PKR buying exchange rate is PKR 218.75 as per Pakistan Interbank and...

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