The growing strength of the dollar poses a threat to the stability of emerging economies, a global financial watchdog has warned.
The Bank for International Settlements (BIS), often described as the central bankers’ bank, has warned that fragility in financial markets could have “a profound impact on the global economy”, especially emerging economies, such as China and India.
Its warning came as China released disappointing trade figures on Monday, and the dollar rose to a seven-year high against the yen and a five-year high against the Bloomberg Dollar Spot Index, a basket of 10 currencies.
The Switzerland-based BIS also revealed that issuance of collateralised debt obligations – the controversial securities once likened to financial weapons of mass destruction – has surpassed levels recorded before the crisis. Activity in the leveraged loans market – a type of CDO – was running at $250bn (£161bn) per quarter in the year ending September 2014, compared to an average of $190bn in 2005-07.
The data was in the BIS quarterly review, published on Sunday, which analysed recent episodes of stock market turbulence. The latest flash crash was on 15 October, when stock markets plunged in value and movements in US treasury bonds were more severe than the day Lehman Brothers collapsed.
via The Guardian