Last month in "Currencies and stock index performance" (Currency Trader, April 2008) we explored the contributions of the Canadian, European, and African/Middle Eastern currencies to country-specific relative stock market performance. This month we will complete the study for Latin American and Asian currencies.

The article concluded:

First, national stock markets tend to have strongly positive relative performance betas to their own currencies. This flies in the face of all those who persist in believing, for example, a weak dollar benefits the U.S. stock market. Second, strong currencies tend to induce negative performance effects on the U.S. stock market. Perhaps this is an artifact of the general underperformance of the larger stock markets noted at the beginning of the article. But perhaps something deeper is at work: When investors gain confidence in their own currency, they tend to hold it and invest in their own markets.