The continued strength of the US dollar is beginning to be felt by the world as many struggle with the rising cost of living following the sharp fall in the national currency.
It is well known that the strengthening of the US dollar is caused by an aggressive increase in interest rates by the Federal Reserve (Fed).
This in turn led to higher rates on US government and corporate bonds broadly and attracted investor interest following a strong currency.
On the other hand, a different situation occurred in other countries that saw a drastic fall in the currency, especially poor countries.
Despite this, rich countries are also not exempt from experiencing the same fate due to the strengthening of the dollar.
Europe, which is now threatened with recession due to soaring energy prices, has had to watch the value of its currency plunge to a 20-year low and trade below the $1 price parity.
The same fate also faced the pound currency which plunged to the weakest level of all time in addition to being driven by mistakes in the economic plan of UK Prime Minister Liz Truss.
How does a strong dollar cause 'suffering' to other countries?
It makes other countries' imports more expensive thus adding to the existing inflationary pressure.
Put pressure on companies, consumers and governments that borrow in dollars.
Force central banks in other countries to raise interest rates in an effort to support their currencies. However, higher rates weaken economic growth.
Normally, countries should benefit from currency depreciation because it will make their goods cheaper and more competitive in the global market.
However, any gains from higher exports may not be felt at this time due to stagnant economic growth in almost all countries.
In short, the strengthening of the US dollar is bad news for the global economy which may see it fall into recession next year.
