Emerging-market ETFs tumble as U.S. dollar spikes

Exchange-traded funds tracking emerging-market equities slumped on Tuesday as the U.S. dollar spiked during Federal Reserve head Jerome Powell's first congressional testimony. The Vanguard FTSE Emerging Markets ETF sank 2.1% and was on track for its biggest one-day percentage decline since Feb. 8. Separately, the iShares MSCI Emerging Markets ETF was down 2.2% while the iShares Core MSCI Emerging Markets ETF lost 2.1%. All three were on track for a day of higher-than-average trading volume. The move lower coincided with an advance by the U.S. dollar index , which rose 0.6% and touched its highest level since Jan. 18 as Powell testified. The new chairman dodged the question of whether the central bank would raise interest rates more than the projected three times, however, he said his outlook for the economy had strengthened. Emerging-market stocks often have an inverse correlation with the U.S. dollar because many borrow in the greenback, and have higher costs of paying that back as it strengthens. Over the past 12 months, the Vanguard ETF is up 23.4% while the dollar index is down more than 10%. On Tuesday, the Dow Jones Industrial Average fell 0.1% while the S&P 500 was off 0.4% and the Nasdaq Composite Index was down 0.6%.

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