In the face of the recent strong appreciation of the US dollar, which has smashed a hole in the finances of developing countries. According to Bloomberg, these countries need to spend more than 2 billion US dollars in foreign exchange reserves every day to try to support the exchange rate of their currencies against the US dollar. A total of $379 billion has been invested in foreign exchange reserves that were originally reserved for emergency reserves against a severe economic crisis.

U.S. dollar appreciates strongly, emerging market countries including Turkey

This shows how strong the appreciation of the U.S. dollar is and how dangerous the current situation is. Although some fragile countries have tried to stabilize foreign exchange markets, they have achieved little success. Many countries, including Ghana, Pakistan, and Chile, have their currencies fallen to record lows. Point, intensifying inflation, deepening poverty, and the social unrest caused by the nearly three-year recession under the epidemic has become more serious. The currencies of 36 countries around the world have depreciated by at least 10% this year, including Sri Lankan rupee and Argentine peso. 10 national currencies, the depreciation rate is more than 20%.

This is somewhat similar to the major crises in emerging markets over the past half century, the Latin American debt crisis in the 1980s, and the wave of currency devaluations that engulfed Asia a decade later. Most analysts believe that such an extreme disintegration is unlikely at present, but also point out that the Fed, which is the main driver of the surge in the dollar, still has a lot of work to do to curb inflation. The more developing countries, the greater the risk of a full-blown currency crisis, which could lead to a debt crisis.

Emerging markets could undoubtedly have a real crisis, they are already at the tipping point, and a strong dollar has brought all uncertainty to the top, especially for fragile emerging markets.

Of course, it is not just emerging countries that are hit by a strong dollar, but also Europe and Japan. Last month, the euro fell to parity against the dollar for the first time in 20 years, while the yen fell to its lowest level since 1998.

While the euro and yen have fallen, European and Japanese companies and consumers have to pay more to buy goods abroad, but developing countries that rely on the dollar to finance their governments face a life-and-death threat.

Although spending less than 6 percent of reserves this year in foreign exchange reserves has caught investors' attention, according to data compiled by the International Monetary Fund on 65 developing countries, the biggest drop since 2015, this time Ghana, Pakistan, Egypt, Turkey and Bulgaria, some of the countries with the fastest declines in foreign exchange readiness, were also some of the countries with the worst currency sell-offs.

In an environment of global liquidity crunch, declining growth expectations, rising inflationary pressures and a stronger dollar, there are reasons to believe that emerging market countries may face persistent monetary pressures.