While the dollar was struggling overall in 2017, non-dollar countries took full advantage of last year´s dollar weakness. According to the Bank of International Settlements (BIS), the total amount of credit to foreign (nonbank) borrowers increased dramatically as a result of the weaker dollar. By the way, feel free to interpret “nonbank borrowers” as emerging market economies. In the second half of 2017, a staggering 22% was issued in dollar-denominated debt. Issuing dollar-denominated debt is all well, as long as the dollar depreciates or, at least, does not appreciate.

Argentina is perhaps the best illustration of how issuing dollar-denominated debt can go terribly wrong. In June last year, the Argentinian government sold $2.75 billion dollars of 100-year dollar-denominated sovereign bonds. Against a coupon rate of 7.25%, the auction of the bonds was oversubscribed by more than 3.5 times. It appears as if everything was champagne and caviar, until last week things took a turn for the worse.

The Argentinian Peso and the Dollar

The decline of the Argentinian peso against the US dollar. Source: Financial Times

Dollar Cycle Seems to Have Reached a Turning Point

Whenever the dollar appreciates, great problems and crises erupt in developing economies. Whenever the dollar depreciates, economic growth in developing economies goes up. A stronger dollar means bad news for many regions in the world, of which the Argentinian peso is the first victim. Source: Bladex

Elon Musk Is Also Losing His Patience

“Bond Vigilantes” Are Back with a Vengeance

Market interest rates are now rising faster than the Fed benchmark rate: further Fed rate hikes are therefore as good as inevitable this year. Source: St Louis Fed


Sign up for our periodical newsletter to stay informed about the gold and silver markets and special offers.


GoldRepublic operates under license from the Dutch Authority for the Financial Markets (AFM),
Registration Number 12020650