How a Rising U.S. Dollar Puts Argentina's and Brazil's Economies at Risk

Jun 28, 2018 | 12:35 GMT

Currency exchange values posted in Buenos Aires, Argentina, on June 15, 2018.

Currency exchange values posted in Buenos Aires, Argentina, on June 15, 2018. Argentina's peso and Brazil's real are among the world's most vulnerable currencies to a rising U.S. dollar.



  • Argentina's financial capacity to deal with a rising U.S. dollar is limited, and a weakening peso will cause it to miss its inflation target this year. But not all news is bad news: The country recently was upgraded from frontier to emerging market status.
  • Brazil's currency is also expected to depreciate further against the dollar. But its trade surplus, low inflation rate and other economic strengths will ease the dollar's negative effects.
  • Uncertainty about the outcome of Brazil's presidential vote in October could cause the central bank to raise interest rates, which would slow economic growth.

The strengthening U.S. dollar is causing capital flight in emerging markets such as Argentina and Brazil. For the past month, the Argentine peso and the Brazilian real have been among the world's worst-performing currencies against the dollar. Despite that weak performance and the negative effect that a rising U.S. dollar will have on their economies, major differences exist between Argentina's and Brazil's financial capacity and level of vulnerability to a stronger dollar....

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