Risk on or risk off? These are stupid terms that oversimplify what is going on in the global financial markets, but they can be useful in the short term.
The dollar index DXY (NYSE:UUP) closed right under 75 on Friday, which is a slight technical positive for the euro and the emerging markets.
This level was closely watched throughout the day because it represents a small but appreciable move below the 50-day moving average that has served as support for DXY over the last few weeks.
Unless DXY can reclaim 75, it now has resistance above it again — as it has for most of the year to date.
Month-end account settling played a role in Friday’s action and the sentiment now seems to favor more comfort out of Europe where Greece and other euro risk areas are concerned.
At this point, the currency markets are telling us that U.S. data releases have been weak enough to fuel a conversation on further U.S. stimulus if not outright action.
I would not bank on this, but as they say, “perception is pricing.” This is positive for emerging markets if not globally a growth-positive development.
We might see iShares MSCI Emerging Markets Index ETF (NYSE:EEM) outperform the SPDR S&P 500 ETF (NYSE:SPY) for awhile here.
Compare EEM on top to SPY below it:
We have also seen traders buying oil into the month end.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.