BIS warns on perils of strong USD to emerging economies

FXStreet (Bali) - The Bank for International Settlements, published its latest Quarterly Review, warning that a period of prolonged appreciation in the US Dollar from current levels would add pressure on emerging economies, due to the large USD-denominated debts companies hold.

Claudio Borio, the head of the BIS’s monetary and economic department, was cited by the Financial Times, noting: “To my mind, these events underline the fragility — dare I say growing fragility — hidden beneath the markets’ buoyancy."

Mr Borio added: “Should the US dollar, the dominant international currency, continue its ascent, this could expose currency and funding mismatches by raising debt burdens. The corresponding tightening of financial conditions could only worsen once interest rates in the US normalise.”