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Expand chart
Data: Institute of International Finance; Note: Values not adjusted for inflation; Chart: Harry Stevens/Axios

The continued strength of the dollar has been a headwind for U.S. businesses and it may begin to put a major strain on economies outside of the United States.

Where it stands: The share of debt issued by emerging market countries in dollars rose to an all-time high in the first quarter, data from the Institute of International Finance shows. If the currency trend doesn't change soon, countries already struggling with weakness at home will find themselves in serious trouble when these bonds need to be repaid.

  • While risk assets from global stocks to high-yield "junk bonds" have delivered strong returns to investors so far this year, emerging market currencies, which typically rally in such an environment, have missed the party entirely.
  • MSCI's Emerging Markets Currency Index last week fell to its lowest level in more than 3 months while the dollar index rose to its highest since June 2017.

Why it matters: The weakness in EM currencies suggests the market is still worried about the global economy, despite strong and steady economic readings from the U.S. and improvement in China.

The big picture: EM's problem children, Argentina and Turkey, have seen their currencies fall by around 13% and 9% against the dollar so far this year, after record losses in 2018. Both are experiencing recessions and analysts worry that defaults in 1 or both countries are on the horizon.

  • The dollar's strength could become "a chronic source of macroeconomic instability," the IIF warns.

The bottom line: Emerging market economies now make up 60% of global growth. Their health is imperative for the world economy to continue moving forward, and the dollar's strength has been weighing on it.

Go deeper: The global economic whiplash between stocks and currency markets

Go deeper

Rep. Rice demands Cuomo resign after 3rd woman accuses him of misconduct

New York Gov. Andrew Cuomo during a February news conference in New York City. Photo: Seth Wenig/POOL/AFP via Getty Images

Rep. Kathleen Rice (D-N.Y.) on Monday evening called for New York Gov. Andrew Cuomo (D) to resign, after a third woman accused him of inappropriate behavior.

Driving the news: Anna Ruch, a former member of the Obama administration and the 2020 Biden campaign, told the New York Times Monday that Cuomo asked to kiss her at a New York City wedding reception in September 2019.

Scoop: Inside the GOP's plan to retake the House

House Minority Leader Kevin McCarthy. Photo: Elijah Nouvelage/Bloomberg via Getty Images

House Republicans will reclaim their majority in 2022 by offering candidates who are women, minorities or veterans, a memo obtained by Axios says.

Why it matters: The document, drafted by a super PAC blessed by House Minority Leader Kevin McCarthy, names top Democrats to target — Jared Golden of Maine, Matt Cartwright of Pennsylvania and Ron Kind of Wisconsin — and the type of Republican candidates to beat them.

4 hours ago - Politics & Policy

Scoop: Trump talked out of early Ohio endorsement

Jane Timken at a 2017 Trump rally. Photo: Kyle Mazza/NurPhoto via Getty Images

Donald Trump had to be talked out of making an early endorsement in Ohio's 2022 U.S. Senate race, a sign of his eagerness to reengage politically, people familiar with the conversations tell Axios.

What we're hearing: The former president discussed endorsing former state GOP chair Jane Timken last week during a meeting at Mar-a-Lago with RNC Chairwoman Ronna McDaniel, but top advisers — including Donald Trump Jr. — urged him to wait.