Dec. 31 (Bloomberg) -- Developing nations plan to sell the most dollar-denominated bonds since 2005, reversing a shift into local debt, as commodities prices fall, foreign reserves diminish and emerging-market currencies weaken.
Bottom line. It is very risky for emerging countries to go short the dollar and long their local currencies. Their currencies will tumble if their economies falter and they have to inflate them more than the industrialized world.
As in 1998, their economies will be put at risk. If their currencies weaken, where will they find the money to pay for maturing bonds issued in US dollars? Is this another bubble in the making?
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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