FOLLOW US

US Treasury Secretary Janet Yellen said the soaring US dollar is not unbalancing markets, as countries rush to defend their currencies or face the risk of a debt crisis.

Speaking in an interview with the Financial Times, Yellen criticized the OPEC+ decision to cut oil output quotas, saying they have a negative impact on the global economy.

The US dollar skyrocketed 16% this year against its major counterparts — and this is having a destabilizing effect on other currencies.

But Yellen brushed off worries about market volatility and disruption, the FT reported. 

"We're monitoring currency movements and their impacts very closely," she said. "And we continue to think that markets are functioning pretty well and are generally appropriate given the underlying differences across countries and policies and economic situations."

The effects of a soaring dollar are starting to have an impact on other economies. The Bank of Japan recently intervened to defend the yen for the first time in 24 years, while Korea and China have also made moves. The euro has plunged below parity with the greenback in recent months. 

Yellen said the dollar's strength is a reflection of the health of the US economy, relative to others worldwide.

"We have seen a significant appreciation in the dollar, but I think it's mainly driven by differences in macro fundamentals, across countries," she said.

"In the case of the US, it's safe haven flows responding to geopolitical tensions and of course, different paces of monetary tightening," she added

"From the US perspective, a stronger dollar is 'our currency, but your problem' for a lot of the other parts of the world," Kamakshya Trivedi, Goldman Sachs' head of global foreign-exchange research, said on a podcast last week.

"In some of the more vulnerable pockets of emerging markets, where there is a substantial amount of dollar-denominated debt, there is already a debt crisis," he added, pointing to Sri Lanka, Pakistan, and Ghana as examples.