US Dollar Fluctuations Drive Euro Area Investment in Emerging Markets
Euro area investors tend to prefer investing in bonds denominated in their home currency. Fluctuations in the US dollar have a significant impact on their investment decisions in emerging markets, indicating a link between global risk appetite and currency movements. Other global factors like the VIX and central bank policies have less influence on these investment choices. Interestingly, Euro-denominated bonds are less affected by these global factors, suggesting a bias towards holding bonds in their home currency.