The existence of one major reserve currency can make exchange rate fluctuations more abrupt; at the same time it limits the scope for markets to discipline macroeconomic policies in advanced deficit economies  2  BIS central bankers’ speeches  (especially the US). Thus far only limited realignment of exchange rates in emerging market economies with large surpluses took place.
The pegging of exchange rates to the dollar affects the exchange rate of third countries away from fundamentals. In emerging market economies with flexible exchange rates and open capital accounts, large capital inflows have pushed up their exchange rates, in some cases into overvaluation territory (for example, in Latin America).