Impact of Dollar crash on Economies and Markets
Posted by
admin in
Articles on
Oct 18th, 2009 |
no responses
I have read an interesting article MSNBC which talked about What happens if US Dollar crashes against major currencies. Here are some highlights of the article for your quick knowledge. Because the world economies now a days are tightly linked, a major drop in Dollar price can impact so many sectors and businesses even in India.
Some Positives for USA Economy:
- U.S. manufacturers would find it easier to compete globally.
- Foreign tourism would boom in the U.S.
Some Negatives for USA Economy:
- On the bad side, inflation in the U.S. would zoom because of the rising cost of imported products.
- Americans would have even more trouble getting a loan as foreign buyers pull out of the debt market.
Around the world outside of USA:
- The cheap dollar would make it harder for other nations to export to the U.S., hurting their growth.
- China could face social unrest.
- Trade wars could break out.
- There could be blowups at overexposed banks whose risk managers were sure no such dollar bust could happen.
In India:
- If dollar depreciates against the Indian Rupee, all export oriented businesses could suffer because they have to charge more dollors to keep their profit margings (in rupee terms) which makes them less compititive. Or if they choose to not hike the dollar charges their income in rupee terms would go down as the dollar becomes cheap. For example, this would directly hurt export business like IT, ITES, BPO, KPO, Textile exports etc.
- Import oriented businesses could benefit as they have to pay less number of rupees to import the same amount of goods. For example, the rise in international crude oil price will be less painful to India if rupee appreciates against dollar.
