Emerging market stocks and currencies suffer biggest weekly drop since 2020 due to oil price shock

Golden Ten Data, March 6 – Emerging market stocks and currencies are facing their largest weekly decline since the peak of the pandemic in 2020. The MSCI Emerging Markets Currency Index has fallen by about 1.4% this week, while the Emerging Markets Stock Index has dropped by more than 6%. Both are on track to record their worst weekly performance since March 2020. The surge in oil prices continues to put pressure on the outlook for emerging market currencies. Citi analysts, including Luis Costa, wrote: "We have significantly reduced risk in recent days, but still hope to rebuild long positions in emerging markets when signs of stabilization appear." He pointed out that although there are "preliminary signs of oil price stabilization," it is still too early to assume that oil prices will move as they did after the Russia-Ukraine conflict in 2022. Safe-haven demand has pushed up the US dollar, and all emerging market currencies have depreciated against the dollar this week.