EM currency pairs vs. local stock markets correlation

asked by u/lschmidt · 8d · 1 answers

For those trading EM, how much weight do you put on local currency performance influencing equity market direction? I'm seeing $ZAR strength not always translating to the JSE doing well, and vice-versa, which contradicts my initial understanding that a stronger currency generally implies a more stable economy, thus boosting equities. Am I oversimplifying the relationship here?

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  • u/obi_k· 0 pts· 8d

    It's a really good question, and you're not oversimplifying entirely. I tend to look at the 'why' behind the currency movement. If ZAR is strengthening due to hot money inflows looking for carry, that might not have the same positive impact on domestic equities as a strengthening based on improved current account fundamentals or commodity price strength.

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