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A12 BUSINESS
Friday 21 OctOber 2022

‘Bad situation’: Soaring U.S. dollar

spreads pain worldwide

By PAUL WISEMAN, KELVIN
CHAN, SAMY MAGDY and
AYSE WIETING
Associated Press
The cost of living in Cairo
has soared so much that
security guard Mustafa
Gamal had to send his wife
and year-old daughter to
live with his parents in a vil-
lage 70 miles south of the
Egyptian capital to save
money.
Gamal, 28, stayed behind,
working two jobs, sharing
an apartment with other Workers gather as they wait for customers outside a secondhand
young people and elimi- car parts shop in the industrial area of the capital Nairobi, Kenya,
nating meat from his diet. Friday, Oct. 7, 2022.
“The prices of everything Associated Press
have been doubled,” he sures the dollar against a There’s nothing else we
said. “There was no alter- basket of key currencies. can do.’’
native.’’ The reasons for the dol- Rich countries aren’t im-
Around the world, people lar’s rise are no mystery. To mune. In Europe, which
are sharing Gamal’s pain combat soaring U.S. infla- was already teetering to-
and frustration. An auto tion, the Federal Reserve ward recession amid soar-
parts dealer in Nairobi, a has raised its benchmark ing energy prices, one
seller of baby clothes in short-term interest rate five euro is worth less than a $1
Istanbul and a wine im- times this year and is sig- for the first time in 20 years,
porter in Manchester, Eng- naling more hikes are likely. and the British pound has
land, have the same com- That has led to higher rates plunged 18% from a year
plaint: A surging U.S. dollar on a wide range of U.S. ago. The pound recently
makes their local curren- government and corpo- flirted with dollar parity af-
cies weaker, contributing rate bonds, luring investors ter Britain’s new prime min-
to skyrocketing prices for and driving up the U.S. cur- ister, Liz Truss, announced
everyday goods and ser- rency. Most other curren- huge tax cuts that roiled fi-
vices. This is compounding cies are much weaker by nancial markets and led to
financial distress at a time comparison, especially in the ouster of her Treasury
when families are already poor countries. The Indian secretary.
facing food and energy rupee has dropped nearly Ordinarily, countries could
crunches tied to Russia’s in- 10% this year against the get some benefit from fall-
vasion of Ukraine. dollar, the Egyptian pound ing currencies because
“A strong dollar makes a 20%, the Turkish lira an as- it makes their products
bad situation worse in the tounding 28%. cheaper and more com-
rest of the world,’’ says Es- Celal Kaleli, 60, sells infant petitive overseas. But at
war Prasad, a professor of clothing and diaper bags the moment, any gain
trade policy at Cornell Uni- in Istanbul. Because he from higher exports is mut-
versity. Many economists needs more lira to buy im- ed because economic
worry that the sharp rise ported zippers and liners growth is sputtering almost
of the dollar is increasing priced in dollars, he has everywhere.
the likelihood of a global to raise prices for the Turk- A rising dollar is causing
recession sometime next ish customers who struggle pain overseas in a number
year. to pay him in the much- of ways: It makes other
The dollar is up 18% this diminished local currency. countries’ imports more ex-
year and last month hit a “We’re waiting for the new pensive, adding to existing
20-year high, according year,” he said. “We’ll look inflationary pressures.
to the benchmark ICE U.S. into our finances, and we’ll It squeezes companies,
Dollar Index, which mea- downsize accordingly. consumers and govern-
ments that borrowed in
dollars. That’s because
more local currency is
needed to convert into
dollars when making loan
payments.
It forces central banks in
other countries to raise in-
terest rates to try and prop
up their currencies and
keep money from fleeing
their borders. q