The Dollar leads Emerging Markets equities: The veteran's mantra

  • Stable US$ reduces fundamental FX rate and fund translation risks in EM equities and fund inflow trends mirror US$ moves

  • EM equity index performance is very correlated with US$ over the last 3 years, but much less so on 5-20 year time frames

  • Country mix changes in EM might explain this; China's dominance in EM index and rise of locals might weaken the US$ link
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