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A simple thread to understand relationship between US Dollar and Emerging Markets.
The relationship between the performance of Emerging Market stocks and the US Dollar is one of the tightest macro relationships that exists in investing.
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When US Dollar weakens, EM index outperform World Index and when US Dollar strengthens EM index underperform World index.
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Then from 2001 to 2010, the U.S. dollar depreciated over 18% while the MSCI EM Index outperformed the MSCI World Index by 14% annualised.
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Overall, from 1995 to 2020, this relationship has a correlation of -0.35.
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A weaker dollar allows Emerging Market countries more freedom to provide fiscal stimulus without fearing negative implications for their own economies.
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As case with India, government will be more comfortable to push fiscal stimulus now when INR is stable.
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Emerging markets are a natural choice as they tend to benefit from weakening dollar and grow faster than DMs.
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Easy monetary policy weakens the dollar and leads to its depreciation. Since U.S. dollar is a fiat currency, meaning that it is not backed by gold, it can be created anytime easily.
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Since US Fed has expanded its Balance Sheet at record speed, US Dollar may go through a weak patch.
Taking cue from multiple cycles in the past, if US Dollar continues to weaken, Emerging Market stocks may outperform.
Watch this trend closely!
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Edelweiss Emerging Market Opportunities Equity Offshore Fund
https://t.co/ea0nbUxAmF
Edelweiss Greater China Equity Offshore Fund
https://t.co/AXEWzfKdhY
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Ok here is the explanation. Grab a cup of coffee and read on. If you have not read/noticed this, you will see intraday options movement in a new light.
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
In a high IV environment or when the market is very volatile
— Subhadip Nandy (@SubhadipNandy16) January 21, 2022
" OTM options will behave like ATM options", one will get almost the same delta movement
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
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Oh my Goodness!!!
I might have a panic attack due to excitement!!
Read this thread to the end...I just had an epiphany and my mind is blown. Actually, more than blown. More like OBLITERATED! This is the thing! This is the thing that will blow the entire thing out of the water!
Has this man been concealing his true identity?
Is this man a supposed 'dead' Seal Team Six soldier?
Witness protection to be kept safe until the right moment when all will be revealed?!
Who ELSE is alive that may have faked their death/gone into witness protection?
Were "golden tickets" inside the envelopes??
Are these "golden tickets" going to lead to their ultimate undoing?
Review crumbs on the board re: 'gold'.
#SEALTeam6 Trump re-tweeted this.
I might have a panic attack due to excitement!!
Read this thread to the end...I just had an epiphany and my mind is blown. Actually, more than blown. More like OBLITERATED! This is the thing! This is the thing that will blow the entire thing out of the water!
Tik Tok pic.twitter.com/8X3oMxvncP
— Scotty Mar10 (@Allenma15086871) December 29, 2020
Has this man been concealing his true identity?
Is this man a supposed 'dead' Seal Team Six soldier?
Witness protection to be kept safe until the right moment when all will be revealed?!
Who ELSE is alive that may have faked their death/gone into witness protection?

Were "golden tickets" inside the envelopes??

Are these "golden tickets" going to lead to their ultimate undoing?
Review crumbs on the board re: 'gold'.

#SEALTeam6 Trump re-tweeted this.
