The US dollar continues to fall, and Bank of America Securities bullish on emerging market assets.

Bank of America Merrill Lynch Securities said that due to the expectation of a continued decline in the US dollar, emerging market assets are expected to achieve double-digit returns this year. David Hauner, head of global emerging market fixed income strategy at Bank of America Merrill Lynch Securities, said, "This year, we can easily maintain double-digit returns because we believe the US dollar is the most important driving factor and we believe that long-term US bonds will stabilize." Bank of America Merrill Lynch Securities is bullish on Eastern European currencies and stocks. Hauner said that in terms of fixed income, Brazil remains the top choice because the interest rates in this South American country are very high and may start to decline before the end of the year. The US dollar exchange rate is close to a two-year low. Wall Street banks including Morgan Stanley and JPMorgan predict that due to the possibility of the Fed cutting interest rates, slowing economic growth, and uncertainty in fiscal and trade policies, the US dollar will continue to weaken. This may accelerate the flow of funds from US assets to developing countries. Hauner said, "In the context of a weakening US dollar, the currency that performs best among major currencies is the euro. This usually means that currencies in the entire European time zone should perform best, as these currencies benefit the most when the euro appreciates." The momentum in emerging markets this year is mainly supported by local currency bonds and stocks. Local sovereign bonds brought an average total return of 5.7% to investors, with Brazil leading the way and benefiting from an arbitrage frenzy with yields reaching 20%. The returns of other 10 countries also reached or exceeded 10%. Emerging market stocks have ended seven consecutive years of underperforming US stocks. Driven by Chinese and Indian stocks, the MSCI Emerging Markets Index outperformed the S&P 500 Index by over 7%. As the US dollar depreciates, emerging market stocks rebound. Despite the positive returns on emerging market assets this year, Hauner said that investors still have relatively low holdings in emerging market assets, which may change in the coming months. Hauner said, "People need to see continued surprising gains in emerging markets over the next few months, right? In the past, people suffered heavy losses on emerging market assets. Over time, they will become more confident."