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March 3, 2020, 11:00 a.m. EST

Emerging market assets jump after surprise rate cut spurs weaker dollar

Prices for emerging market bonds and equities climbed on Tuesday after the Federal Reserve cut interest rates by 50 basis points, boosting the attraction of developing-market assets that can benefit from a weaker dollar backdrop. The iShares JP Morgan USD Emerging Market Bonds (NAS:EMB) exchange-traded fund was up 1.2%, while the iShares MSCI Emerging Markets ETF (PSE:EEM) was up 0.9%. The ICE U.S. Dollar Index (IFUS:DXY) , which tracks the performance of the greenback against its major rivals, was down 0.4%. Lower interest rates in the U.S. tend to send investors looking for higher-yielding assets abroad in emerging markets. A weaker dollar also benefits emerging market corporations that borrow in the greenback, making it cheaper to pay down their debt obligations.

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