Posted on 04/15/2015 11:16:57 AM PDT by Citizen Zed
Risks to the global financial system are rising, as emerging markets face a squeeze from the strong U.S. dollar and weak commodity prices, the IMF said.
While the strengthening greenback and lower oil prices are boosting the world recovery, the changing landscape is putting pressure on countries and firms that export crude and other commodities, the International Monetary Fund said in its semiannual Global Financial Stability Report released Wednesday.
"Further rapid dollar appreciation and an abrupt rise in U.S. interest rates, coupled with a rise in geopolitical risks, could put added pressure on emerging-market currencies and asset markets," the IMF said. "Foreign investors could abruptly reduce their holdings of local-currency debt, thereby adding to turbulence and creating debt rollover challenges."
The Washington-based lender said the strains are already becoming evident in the ability of oil and gas companies in Argentina, Brazil, Nigeria and South Africa to repay debt.
The IMF's warning comes two years after emerging markets were roiled by speculation the Federal Reserve would wind down its unprecedented stimulus program, an episode known as the "taper tantrum." Fed policy makers have signaled the central bank may start raising rates as early as June, a move that would increase the burden on foreign companies that borrowed in U.S. dollars.
A "sudden rise" of 1 percentage point in the 10-year Treasury yield is "quite conceivable" if a Fed interest-rate increase comes sooner than investors anticipate, the IMF said. "Shifts of this magnitude can generate negative shocks globally, especially in emerging-market economies."
Volatility in major foreign-exchange rates has increased by more than any similar time since the global financial crisis, the IMF said. Reduced liquidity in the currency and fixed- income markets could make it difficult for investors to adjust their portfolios, it said.
(Excerpt) Read more at sltrib.com ...
QE will end the day we have a Republican President, who will then take the blame for the ‘suddenly bad’ economy.
This your first Rodeo, Son? LOL! :)
It’s gonna be ugly.
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