1- Emerging economies like turkey had lot of loans in USD. Loans were to private companies, banks and government of turkey. Loans were very high, around 53% of GDP. Apart from loans many foreign investors also made equity investments in turkey. Than one fine day, turkey detains Christian Pastor and Trump gets angry and announces he shall double the tariff in steels and also announces he may impose sanctions. Turkish President also made strong speeches. ON THE OTHER HAND FED INCREASED INTEREST RATE IN US WHICH RUINED CAPACITY TO PAY. And Foreign Investor/ Turkish Banks were in confusion and impulsively wanted to close their positions. Hence turkish currency crashed. Simiarly argentinian peso crashed. And now foreign investors who have around 2.7 trillion dollars as bonds and loans in other developing market economies like india, south africa, brazil, hongkong, phillipines etc. are willing to close their positions.
2 - On the other hand in USA, economic growth was strong. As a result unemployment had significantly reduced. Now Fed knows if interest is kept low, soon inflation can hit and recession can follow. So its increasing interest rate slowly to cool off the hot growths and to make it sustainable. This ofcourse made stock market bit sluggish in US after Dow Jones made record high in 6 month time but bond market surged. Also as interest rate in US is rising slowly, Dollar Money from turkey, argentina, south africa, chile, etc. is coming to US.
3 - Dollar rises means. Crude Oil Prices goes up. As a result more demand for dollar rises globally
.....if dollar rises rapidly than it can hit US hard as well as US exports will reduce......Dollar rising is harmful to US after a certain extent....
Negatives - What does it means for Nepal?
1 - Price of Petroleum product increases
2 - Hydro Power Cost rises.
3 - Import Bill Increases
Positives - What does it means for Nepal?
1 - Remittance increases. More people will remit the money to Nepal
2 - Tourism Industry shall earn more. This is peak season for tourist.
.....Baki Ishwor Ko Leela....
« Last edit by पूजीभैरव on Wed Oct 10, 2018 6:57 am. »