The Wall Street Journal - Business and Economics - Assignment Example

The paper reported that the dollar hit a seven and half year high against Japan’s Yen. At the same time, it hit a 15-month high when it was weighed against the British pound. On the same scale, it was at a two-year high against the euro. The surge has raised arguments as to whether Fed should increase the rates and when it is appropriate to do so. The dollar has gained significantly against the euro and has since posed far-reaching implications to the economies beyond the United States.

The paper reports that this performance may create economic vulnerabilities because many firms in emerging markets have liabilities that are attributed to the large US dollars. If any currency depreciates against the dollar, it reduces the ability of many firms to borrow. Thus, this inability may impose worse financial conditions (WSJ: Dec. 8, 2014). This heat may be felt by currencies in the greater Latin America “if the market gets ahead of itself.” Changes in the Fed are likely to affect other economies. WSJ added that with assistance from OPEC, there will be a higher possibility of an oversupplied market in 2015.  When this is coupled with the increasing strength of the dollar, there is a higher likelihood of downside risk. This implies that virtually all world economies depend on the performance of the dollar and underscores the centrality of the Fed in shaping the world’s economic fortunes.