Question

How is a rising dollar (a stronger dollar) good for emerging markets (for example in Latin America)? How is it bad for emerging markets?

Answer 1

A rising or a stronger dollar relative to an emerging market's currency would make it expensive for emerging markets to buy or import goods and services from USA, whereas now that the emerging markets' currency is less valuable than before, it would be cheaper for people and businesses in the USA to import from the emerging market.

Therefore, we can see that a rising dollar would result in higher exports from emerging market to US, and lower imports from the US, thereby increasing foreign exchange earnings of the emerging markets as well as increase in real output and employment in their country.

However, a rising dollar also has drawbacks for developing countries as their debt denominated in dollars have increased than before due to rising dollar, and it also may lead to outfloe of capital from emerging markets to the US.