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The Strong U.S. Dollar Is Extending Pain in Emerging-Markets Currencies

Investors are betting the U.S. dollar’s prolonged rise will hurt currencies ranging from the Hungarian forint to the Philippine peso, with the forint and the Polish zloty hitting fresh lows recently. The extended losses are another example of how the dollar’s strength is rippling through emerging-markets currencies and pressuring central banks across the globe to increase rates—even at the cost of a recession.

“Trouble is coming in emerging markets,” said Megan Greene, global economist and senior fellow at the Harvard Kennedy School, pointing toward Sri Lanka’s sovereign-debt crisis and drained foreign-exchange reserves. “It’s a familiar story in emerging markets and a sneak peek of what’s to come.”