Currency exchange rates that favor the dollar are helping the U.S. government finance its debt. But, the slanted exchange rates are not giving export markets a boost, given the global slowdown. As a result, "virtually all of the low-income countries are in very serious trouble," said Eswar Prasad, a senior fellow at the Brookings Institution, The New York Times reported Monday.
The dollar has gained 13 percent against major foreign currencies in the last 12 month, the Federal Reserve said.
The Institute of International Finance said investments in emerging countries plummeted from $928 billion in 2007 to $466 in 2008.
In the same year, with China leading the way, foreign investments in Treasury bills rose by $456 billion in 2008.
Counties near default are finding the exchange rates tipping the scales against them even further.
"Debt collapses are going to wreak havoc with exchange rates," Harvard professor Kenneth Rogoff predicted.
"A lot of countries in Europe are already on the brink of default," said Rogof, a former chief economist at the International Monetary Fund.
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