Stephen Jen’s "Dollar Smile” framework to describe gains in the U.S. currency during extreme periods of U.S. economic strength or weakness is a cornerstone of emerging-market investor positioning. It suggests the dollar rises when American growth is higher than the rest of the world, but can also gain on haven purchases during periods of economic or stock-market weakness.
SINGAPORE: The phenomenon of the dollar’s strength against emerging-market currencies during U.S. stock market sell-offs -- the so-called Dollar Smile -- has diminished.
A Bloomberg study on the performance of non-Asian developing nation currencies since 2000 shows dollar strength accompanying U.S. equity market corrections is becoming significantly less pronounced -- similar to findings in a recent analysis covering Asian markets.
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