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Stronger Dollar may hurt developing stocks more than currencies

Bloomberg Published on Tue, Aug 08, 2017 / 8:12 AM GMT+8

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(Aug 8): Both emerging-market currencies and stocks shrugged off the biggest rally of the year by the US dollar on Friday. While the greenback’s gain may only be a blip, if it’s a longer trend, equities may have the most on the line.

The MSCI’s emerging market stock index has gained about 24% this year, the biggest rise since 2009, as the greenback has fallen about 8.5%, which so far is the biggest decline for the US currency going back to 2003.

The chart below shows that these two assets are closely linked. They have a 30-day rolling correlation of about -0.4.