EMs vs the dollar: History points to new sell-off for emerging markets

Emerging markets still sensitive to US policy and currency moves

clock • 2 min read

Emerging markets could face a sustained period of weakness akin to falls seen during last year's "taper tantrum" if the dollar's recent bout of strength continues.

The US greenback and emerging markets have been inversely correlated for decades and, although this correlation has fallen in recent years, managers believe a stronger US dollar will hold back emerging markets. While the scale of the divergence between the US dollar and emerging markets seems to have lessened in recent years (see graph), they still remain vulnerable to bouts of dollar strength, as witnessed last summer after the US Federal Reserve hinted at tightening its monetary policy for the first time since the financial crisis. Since then, emerging markets have enjoyed a robust ...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Emerging markets

 PGIM Fixed Income's Cathy Hepworth: How Trump's policy agenda will impact emerging markets

PGIM Fixed Income's Cathy Hepworth: How Trump's policy agenda will impact emerging markets

Markets are diversified

Cathy Hepworth
clock 29 January 2025 • 4 min read
China's central bank switches to one main interest rate in major overhaul decision - reports

China's central bank switches to one main interest rate in major overhaul decision - reports

To behave more like other central banks

Sorin Dojan
clock 03 January 2025 • 2 min read
Kepler Partners' Josef Licsauer: Tariff tightropes

Kepler Partners' Josef Licsauer: Tariff tightropes

Trump's plans causing uncertainty

Josef Licsauer
clock 13 December 2024 • 6 min read
Trustpilot