Let’s take a look at RTS – Russian Trading System stock index and Russian Ruble to USD (RUR/USD): Chart#5 | RTS Stock Index and Ruble Weekly What a correlation - impressive, right? And what about other emerging markets, let’s say – Brazil? Chart#6 | DJ Brazil Stock Index and Brazilian Real Weekly It looks the same – much stronger correlation between the stock market and domestic currency. So, we might say that sometimes this theory works perfectly, but sometimes not. Why? The answer is simple – the less geopolitical value a currency has – the stronger the relation between domestic currency and the stock market. The point is that emerging markets are treated by investors in a crowd. Investors do not separate currency from the stock or even bond market. These markets are treated as a market where you can get some enhanced return on investment, when the world economy is growing. When the world economy falls into recession, investors abandon emerging markets, since they have too much risk. That’s why plunge come in all markets – stocks, currency and bonds. Investors can’t treat Brazilian real or Russian Ruble as a safe-haven. Second, even major but less valuable and important currencies from geopolitical point of view have stronger relation with stock markets. Say, CAD, AUD, GBP will have much more relation with stock market rather than CHF, USD, JPY. And, finally, third – safe-haven currencies have the smallest relation with national stock market, since this relation is skewed by their extraordinary role in the World economy. Besides, just compare what is the Swiss stock market and what is Swiss Franc for global economy – absolutely different things.