The chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas, explained on Tuesday that the fall in the dollar has benefited most other currencies, particularly in Latin America.
“The dollar weakened significantly, by around 10-12% against most other currencies, with the possible exception of the Chinese yuan. This easing of the dollar’s weakness is helping financial conditions in many emerging market economies, especially in countries with dollar-denominated debt,” said Gourinchas.
Inflation is one of the areas where the depreciation of the dollar has had the most beneficial effect.
“Many goods are invoiced in dollars, and with the dollar weaker, import prices are not rising as much in some of these countries. This has contributed to a certain resilience in emerging market economies,” said the economist.
According to him, these emerging economies, especially in Latin America, “have been more comfortable letting currencies adjust when necessary,” which has allowed them to focus on instruments to combat inflation internally.
Gourinchas added that many countries are facing different conditions in the monetary environment.
On the one hand, there are nations that are experiencing significant inflationary pressures and have not achieved their inflation targets, and on the other, there are those that have.
“We see a lot of differentiation in monetary policy stances, which is very appropriate, along with a reliance on letting the exchange rate adjust to reflect these differences in monetary policy,” Gourinchas concluded.
Source: Investing.com
