The US Dollar & Emerging Markets
Understanding the relationship between the US Dollar (USD) and emerging market (EM) equities is essential for investors in the diverse world of EMs. Historically, EM equities have shown a negative correlation with the dollar. A weak dollar can provide a tailwind for EMs in the form of commodity prices (which are typically priced in USDs) and debt repayments (many EM countries and companies borrow in USDs). Myriad factors impact the performance of EM equities but, as we discuss here, the dollar is always worth watching.