Low Oil Prices, Rising Dollar, Ecuador caught in the middle

CAROLYN CUI, MANUELA BADAWY
The Wall Street Journal REPORTED….Two of the most punishing trends in emerging markets are the rising US dollar and falling oil. And caught between them is Ecuador.

The South American country has the misfortune to be an oil producer with a “dollarised” economy that uses the US currency as legal tender.

Dollarisation helped officials rein in inflation in 2000. Now, it is depriving them of the relief valve a depreciating local currency can provide at a time when the drop in oil prices is hurting exports.

Investors could get caught in the squeeze. Ecuador’s bonds have recently rallied in part on the expectation the government will repay a $US650 million ($903m) bond due in December. But the country has billions of dollars more in debt — including bonds due in 2020, 2024 and 2025 — and the outlook for those is less certain. Read Article

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