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A strong dollar does not affect every Latin American economy in the same way. Differences in production, policy, external debt and trade determine how currency movements transmit across the region. The analysis also considers how carry trades and the geopolitical use of the dollar can amplify pressures, making adaptation to dollar dominance a continuing policy challenge.
Read the workWeak US activity data and a shift in Bank of Japan policy helped trigger the August 2024 market scare. The unwinding of carry trades transmitted pressure to emerging market currencies and capital flows. Despite rising recession fears and expectations of deeper Federal Reserve cuts, the assessment retained a constructive outlook for the United States and emerging economies.
Read the workJune 2024 brought $16.1 billion in portfolio inflows to emerging markets, including $11.2 billion into debt and $4.9 billion into equities. Chinese stocks experienced $1.3 billion in withdrawals. The figures separate positive aggregate investment from a continuing divergence between China and other equity markets.
Read the workEmerging markets received $5.5 billion in net portfolio investment in May 2024. Debt inflows of $11.5 billion outweighed equity withdrawals of $6 billion, including $0.7 billion from Chinese stocks. A positive headline balance therefore concealed substantial selling in equities rather than a broadly shared improvement in investment demand.
Read the workThe May 2024 forecast anticipates renewed nonresident investment in emerging markets as their growth and interest rate outlook improves relative to advanced economies. Direct investment remains the main source of external funding, with portfolio investment also recovering unevenly across regions. Weaker growth, geopolitical tensions and delayed Federal Reserve easing remain key risks to the baseline.
Read the workApril 2024 saw $8.2 billion in net portfolio inflows to emerging markets. Debt attracted $12.1 billion, offsetting equity withdrawals of $3.9 billion, including $0.6 billion from Chinese stocks. The positive aggregate therefore reflected bond demand rather than a recovery shared by both major asset classes.
Read the workThe evolution of global trade has made emerging economies increasingly important to international production networks. Regional fragmentation and the pandemic exposed weaknesses in those networks. The May 2024 overview examines how emerging markets respond to trade barriers and sanctions, creating new connections while established trading patterns diverge.
Read the workDiscussions at the 2024 Spring Meetings combined concern about fragmentation and political risk with recognition of US economic strength. That resilience also complicated the outlook for monetary easing. A prolonged period of high Federal Reserve rates could strengthen the dollar, raise borrowing costs and weaken the prospects for international capital flows.
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