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📌 Global Capital Flows — The Tug of War Between U.S. Rates and Emerging-Market Currencies (Part 1) --- Introduction — Why Do U.S. Interest Rates Move Global Capital? Throughout the history of global finance, the U.S. dollar has stood at the center. Economists often call the dollar the global reserve currency—and that’s not just rhetoric. According to the IMF (2024), over 60% of the world’s foreign-exchange reserves are dollar-denominated, and more than 80% of international trade settlements are conducted in dollars. Prices for key commodities—crude oil, grains, iron ore—are quoted in dollars as well, making the greenback effectively the “pricing language” of the world. So why does the Federal Reserve’s (the Fed’s) interest-rate policy carry such outsized influence in this dollar-based system? The reason is simple: interest rates are the price of money. When the Fed hikes rates, returns on safe dollar assets—U.S. Treasuries, dollar deposits—rise. Naturally, global investors...