JP Morgan expects more USD weakness could encourage greater diversification into EM assets

Positng this ICYMI:

J.P. Morgan has raised its year-end target for the MSCI Emerging Markets Index from 1,150 to 1,250, citing attractive valuations, a weaker U.S. dollar, and reduced uncertainty around U.S. trade policy.

• The firm maintains an ‘overweight’ stance on emerging markets.

It noted that while trade tensions have dominated sentiment so far in 2025, fading uncertainty in the second half could provide upside surprises. The index is up 13.5% year-to-date as confidence in U.S. assets declines amid unpredictable trade policy under Trump. The U.S. dollar index has dropped 10% this year.

J.P. Morgan expects continued dollar weakness, which could encourage greater diversification into EM assets. It also forecasts rate cuts in 19 of 21 EM countries in H2 2025—excluding India and Czechia—driven by easing inflation and softer growth. On FX, it sees the Brazilian real and Mexican peso as the top yielding EM currencies.

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USD index, DXY:

This article was written by Eamonn Sheridan at www.forexlive.com.