BRICS Crash as USD Climbs

Brazil, which saw its credit rating downgraded to junk last week, is only the latest Brics economy to crumble in the face of a strong dollar, a global trade slowdown and the prospect of higher US interest rates.

Russia is already in recession; many economists believe China is heading towards a “hard landing”; and South Africa, which managed to append itself to the emerging-markets club in 2010, is on the brink of recession.

Of the group once identified as the shining economic beacons of the future, only India has so far remained relatively insulated from what World Bank chief economist Kaushik Basu described last week as the “troubled” state of the global economy.

It wasn’t supposed to be like this. In 2009, as the rich western countries were surveying the chaos wrought by the financial-market crisis, China was cranking up an immense fiscal stimulus programme to boost demand and kickstart growth. Beijing’s ability to muster financial firepower in the face of the crisis seemed to underline the shift of power towards the nimble emerging nations, with their rapidly growing middle classes, and away from the sclerotic Old World.

“Decoupling” became fashionable. Instead of being tethered to the fortunes of the mighty US (“When America sneezes, the world catches a cold,” went the old saw), emerging economies would break free, nurturing trade links across the developing world and fostering homegrown demand.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza