The exchange rate plays an important role in Emerging Market economies (EMs) for different reasons including i) the influence of the exchange rate on demand in small open economies which tends to be large, ii) the exchange rate often constitutes a key variable for private sector expectations about inflation, and iii) exchange rate fluctuations produce large balance sheet effects when households and firms have foreign currency assets and liabilities (BIS, 2008). Further, the dominant currency paradigm (Gopinath et al, 2020) suggests a central role for the USD in international transactions including in EMs. In addition, the dollar also affects credit conditions as the Bank for International Settlements (2014) estimates that globally, around 80 percent of bank trade credit is denominated in US dollars. Finally, fluctuations in USD have been shown to impact EMs not only through the trade channels but also through financial channels, with real macroeconomic implications that could go in opposite directions (see for instance Avdjiev et al, 2019).