USD to bounce back against emerging market currencies? – NBF
|Krishen Rangasamy, analyst at National Bank Financial, points out that since hitting a peak last September, the Federal Reserve’s Nominal Emerging Market Economies Dollar Index has dropped roughly 2.5%.
Key Quotes
“This depreciation of the U.S. dollar relative to currencies of emerging markets is arguably a positive development with regards to financial stability in the region.”
“A depreciating greenback should make debt servicing less painful for those folks. A weaker dollar can also make it easier for businesses in emerging markets to tap loans from domestic banks which rely on wholesale funding to get access to dollars. That can ripple through emerging economies by boosting business investment and even exports, especially for firms in the supply chain that rely on credit to operate.”
“If the recent surge in the MSCI emerging markets index is any guide, investors already seem to understand this connection between dollar weakness and growth prospects. But can the dollar’s downtrend versus emerging market currencies continue? That could be difficult especially with the Federal Reserve close to ending its easing cycle.”
“For the first time in years inflation is now higher in the U.S. than in emerging markets.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.