Palestine Economy Portal

According to Bloomberg: the US dollar will cause a new headache for the economies facing the rapid outbreak of the Corona virus worldwide, with emerging markets especially vulnerable to their attempts to deal with currency collapse and low demand.

Investors are fleeing emerging markets at record levels and heading heavily towards the dollar as a safe haven, with the Federal Reserve cutting interest rates twice this month without doing anything to reduce the dollar's appeal.

In light of its integration into the global economy more than before, the dollar gains have become an additional pressure on companies and governments, because these gains mean the high costs of their

Bloomberg news agency stated that the dilemma of central banks in emerging markets lies in lowering interest rates to support economic growth, as it risks destabilizing its currencies if the interest rates are greatly reduced.

The Turkish Central Bank was the last bank in emerging markets to cut interest rates urgently, and central banks in South Korea, Chile, Vietnam, Sri Lanka and Pakistan have already cut interest rates this week after the emergency action taken by the federal last Sunday, and it is expected that central banks in South Africa will reduce Indonesia and Brazil will have their main interest rates in the next few days.

Since the global financial crisis, the unexpected rise of the dollar has slowed the growth of world trade, possibly due to tightening financial conditions with the slowdown in dollar lending to emerging markets, according to recent research by the Bank for International Settlements.

The Institute of International Finance said that outflows from emerging markets have already reached record levels, reaching $ 30 billion in 45 days amid the deadly Coruna virus outbreak.

All major emerging market currencies, tracked by the Bloomberg Index, fell against the US dollar since January 20, as fears of a Corona outbreak in Asia began with the Russian ruble and the Mexican peso depreciating by nearly 20%.

"Bloomberg" pointed out that the pain is also felt in emerging Asia, where the decline in the market brought back memories of the Asian financial crisis more than two decades ago, and pointed out that the Indonesian rupiah is the worst performing currency in Asia this year, with a decrease of 8.9%, and that the Korean won The south is trading near its lowest level since 2010, and the Indian rupee fell to a record low last week.

Meanwhile, the Norwegian krone has fallen by more than 16% this year, the lowest level ever in light of the weakness of crude oil, and central bankers in the developed world are coordinating their efforts to ensure the continued flow of the US dollar around the world. The Federal Reserve cut last Sunday, Interest rates on swap lines to facilitate the availability of the dollar with 5 other central banks.

Other central banks in emerging markets outside Asia have taken steps to deal with the economic impact of the Corona virus outbreak. For example, last Tuesday, the Turkish Central Bank lowered the one-week repurchase rate by 100 basis points at an emergency meeting, and also announced About a set of measures designed to enhance the liquidity of the banking sector and promote loan growth.

In addition, Egypt lowered its base rate by 300 basis points in an emergency meeting last Monday evening, which could put pressure on the pound, which is known as one of the best mobile trading currencies over the past two years, but the central bank believes that it is worth the risk to help The economy is facing "Corona".