Economy
September 21, 2018
Broad Currency Weakness Does Not Equal Financial Contagion
Written by Tim Triplett
The following Trade Policy & Economic Briefing was authored by CRU Principal Economist Lisa Morrison
Since March 2018, there has been a broad strengthening of the U.S. dollar. This has developed because of rising U.S. interest rates and strong U.S. economic growth, which is in relative contrast to continued, historically low Eurozone interest rates and slower growth outside the U.S. Emerging market (EM) currencies have fared worse than the majors this year as country-specific factors have caused even larger depreciations against the U.S. dollar. Given the interconnected nature of global supply chains and financial markets, it is worth revisiting how a currency crisis evolves so that we can assess whether the prospect of widespread contagion is on the horizon.
