Mubasher: The strong dollar has been affecting many currencies and foreign exchange reserves in several emerging and frontier markets, as it increases credit risks for economies require external funding.

Among the most affected countries were Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, and Turkey, according to a report released by Moody’s.

"Countries with large current account deficits, high external debt repayments, and substantial foreign-currency government debt are most exposed to the impact of a stronger US dollar," Moody's global managing director of the sovereign risk group Alastair Wilson commented.

Emerging markets that were exposed to large shocks on the back of their external financing conditions in the past are more likely to experience similar shocks now unless they underwent adjustments that decrease their dependence on external funding.

Some economies are vulnerable to major shocks due to the strength of the US dollar, including Angola, Kenya, Indonesia, and Sri Lanka, while other economies are more resilient, among them Brazil, China, India, Mexico, and Russia, the report found.

“Sustained and severe shocks to external financing conditions can have credit implications, in particular when they result in a significant further erosion of financial buffers, raise liquidity risks and/or take fiscal metrics onto a more unfavourable path than Moody's had previously 
expected.”