The US dollar is rising against most other currencies and has been setting new records. But this rapid rise of the USD has also raised fears of a currency crash, as seen in 1997, which shook the world.
Fed, which is responsible for setting the interest rates and other fiscal matters, is on a path to stop inflation. To achieve that, it has been introducing interest rate hikes which are causing people to get into the USD. As a result, the US dollar is gaining ground against the British Pound, INR, PKR, EUR, and various other currencies.
Experts believe that the situation is already getting extreme, and any further fall will lead us to a dire situation! And the results of a stronger USD have also become visible in the US market as well - The earnings of companies are getting less after the conversion. On top of that, the equities markets have also turned bearish on account of a rising USD.
BoE Is Purchasing Government Bonds
To support the weaker Pound, the BoE has also joined the game by purchasing government-issued bonds. Experts believe that this move will remove some of the pressure presented on the Pound Sterling and may even help it against the USD.
However, other markets, such as emerging markets, are not in such a good position. The PKR (Pakistani Rupee) has lost around 29% of its value against the USD, while the Egyptian Pound is down by 20%.
Asian Currencies Are Also Suffering
Similarly, other countries such as Bangladesh and Sri Lanka are now also in a tight spot due to the reduced global liquidity. With rising interest rates, it will become difficult for these countries to raise capital!
Experts believe that import-based economies will experience a lot of trouble in the form of higher inflation, trade deficit widening, and weaker currencies.
Since most of the world's trade is still made in the USD, it will become difficult for the weaker economies to arrange the dollars.