"A surging dollar intensifies currency risk due to the increased unpredictability and potential negativity of exchange rate fluctuations. This inherently discourages investment and makes financial planning more complex for both governments and businesses.
Moreover, in a strong dollar scenario, the expense of refinancing existing debt escalates as the costs linked to issuing new debt to cover maturing obligations increase. This situation can trigger a nasty cycle of growing debt burdens. This is especially true if the dollar keeps strengthening or maintains its strength for a prolonged period.
The Bottom Line
The broader economic implications of this cannot be understated.
High levels of foreign dollar-denominated debt, combined with a strong U.S. dollar, can contribute to financial instability within a country and in the entire world. It can lead to capital outflows, depreciate the local currency further, and exacerbate inflationary pressures. In extreme cases, it may even trigger financial crises, particularly in vulnerable economies."
The Dollar’s Dark Side: Why I’m Predicting a Market Meltdown in March (msn.com)
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