Uridashi Issuance So Far in 2018

Through mid-October 2018, foreign currency Uridashi issuance totaled $7.6 bln. If this pace is sustained, the full year total of $9.6 bln would represent an increase from $8.4 bln in 2017 but would fall short of the $12 bln issued in 2016.

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FOMC Minutes Rattle Markets

  • FOMC minutes are usually a ho-hum affair, but not this time
  • US rates reacted accordingly, as did the dollar initially
  • The US Treasury released its semiannual FX report to Congress yesterday afternoon
  • Commissioner Oettinger said that the EU is likely to reject Italy’s draft budget plan
  • UK reported soft September retail sales; EU has reportedly called off the November Brexit summit
  • Bank of Korea kept rates steady at 1.5%; Banco de Mexico releases its minutes; Chile central bank meets

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Markets Mark Time Ahead of Brexit Summit

  • US rates remain in limbo even as equities rally
  • UK reported softer than expected September CPI data
  • The EU summit in Brussels will take place today
  • South Africa August retail sales are expected at -0.1% y/; Argentina September CPI is expected to rise 40.1% y/y

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From the Securities Lending Trading Desk

In the US, an impending $134 million dollar debt payment due on Monday has made Sears’ bankruptcy all but certain. In Asia, FamilyMart UNY Holdings said it would acquire a 20% stake in Don Quijote Holdings in a deal that could be valued at as much as 212 billion yen ($1.9 billion). In Europe, Reports that funds were looking to increase short positions in Ceconomy have increased borrower demand this week

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Some Thoughts on the Upcoming US Treasury FX Report

The US Treasury will soon release its semiannual report to Congress on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.” Speculation has grown that China will be named a currency manipulator, which would be the first time any country has been named since 1994. We do not think China will be named, which would be positive for Chinese assets as well as the wider EM.

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Dollar Mixed as Markets Await Fresh Drivers

  • US rates have yet to recover back to last week’s highs
  • Yesterday, the US reported a budget deficit for FY2018 ended in September of -$779 bln
  • We believe that the deficit is the elephant in the room with regards to the dollar
  • Italy formally submitted its draft budget to the EU; UK reported labor market data
  • RBA released its minutes overnight; New Zealand reported Q3 CPI
  • China reported September CPI and PPI
  • Turkey August IP rose 1.7% y/y; National Bank of Hungary is expected to keep rates steady at 0.90%

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Drivers for the Week Ahead

  • With US yields backing off last week, the dollar rally has been put on ice
  • US reports September retail sales today; FOMC minutes will be released Wednesday
  • The UK has a heavy data week; all eyes are on Brexit talks
  • China data deluge begins; US Treasury releases its semiannual FX report to Congress
  • Central banks of Hungary, Korea, and Chile meet this week

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What Has Changed in EM

  • Press reports that Trump and Xi will meet on the sidelines of the G20 meeting next month
  • Pakistan has formally requested an IMF program
  • The Monetary Authority of Singapore tightened policy at its semiannual meeting
  • South Africa has a new Finance Minister
  • Turkish courts convicted US pastor Andrew Brunson, but he was then freed
  • Brazil polls are showing Jair Bolsonaro opening up a big lead over Fernando Haddad

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Dollar Steadies as Equity Markets Calm

  • The stock market rout has taken a pause even as US yields are recovering at the long end
  • Some in the Trump administration have tried to walk back criticism of the Fed
  • Italy’s parliament voted yesterday in favor of the government’s draft budget
  • Sterling bulls got a cold dose of reality from the Democratic Unionist Party
  • China reported September trade; Trump and Xi may meet on the sidelines of the G20 meeting
  • MAS tightened policy at its semiannual meeting with a slight increase in the slope of its S$NEER trading band
  • Moody’s is scheduled to review South Africa’s rating today

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