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IMF Blog Updates: Dominant Currencies and the Limits of Exchange Rate Flexibility

Faced with an unprecedented shock of collapsing global demand and commodity prices, capital outflows, major supply chain disruptions and a generalized drop in global trade, many emerging markets and developing economies’ (EMDEs) currencies have weakened sharply. Will these currency movements support the recovery of these economies?


The prevalence of dominant currencies like the US dollar in firms’ pricing decisions alters how trade flows respond to exchange rates.


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