Currency Volatility Stings EM Bond ETFs

“With interest rate differentials between the U.S. and other developed markets widening over the last year, the demand for U.S. dollar assets has surged with the result of increased currency volatility,” reports CNBC.

Related: Treasury Bond ETFs Shouldn’t Count on Support from Foreign Investors

Currency market volatility cuts both ways as has been seen in 2017 and 2018.

“With emerging markets, currency volatility cuts both ways. Last year, investors in local currency EM debt enjoyed a huge tailwind as the MSCI EM currency index rose 3.5 percent against the U.S. dollar. This year, the winds have reversed and with a risk-off mentality in global markets, local currency returns have gone negative,” according to CNBC.

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