Argentine central bank surprised markets with a 500 bp hike in the policy rate yesterday. It is clear that an aggressive orthodox policy response is a necessary but not sufficient condition for stabilizing a nation’s financial markets. We warned back in May that regardless of the measures taken, Argentina is likely to remain under pressure within the context of a broad-based EM sell-off. Continue reading “Argentine Markets Still Suffering Despite Bold Actions”

The Turkish lira continues to tumble as officials refrain from taking any significant actions. We look at two of Turkey’s past crises to gauge the economic toll that this current crisis is likely to take. Continue reading “Lessons from the Past for Turkey”

It seems that rather than offer any orthodox policy solutions, Turkish President Erdogan is doubling down on his confrontational stance. This spells more trouble for Turkish markets when they open Monday. The rumored emergency meeting between Turkish regulators and banks did not materialize this weekend. 　 Continue reading “Erdogan Signals A Lot More Pain Ahead For Turkey”

• Moody’s upgraded Vietnam one notch to Ba3 with stable outlook
• The National Bank of Romania delivered a dovish surprise
• US State Department announced new sanctions on Russia for its nerve gas attack
• Central Bank of Russia said it may reduce its volume of daily FX purchases under the budget rule in order to help reduce FX volatility
• US President Trump added fuel to the fire by announcing increased tariffs on Turkish imports
• Turkey tweaked foreign currency reserve requirements for commercial banks
• S&P upgraded Israel a notch to AA- with stable outlook
• A widening graft probe in Argentina is raising concerns Continue reading “What Has Changed in EM”

Russian assets are coming under greater pressure after various sanctions were announced by the US. The final tally of sanctions is not yet known, but uncertainty regarding their ultimate impact on the economy is likely to keep Russian assets under pressure. Continue reading “Sanctions Risk to Weigh on Russian Assets”

The shekel traded at its weakest level since March 2017 this week. With inflation pressures rising, the incoming central bank Governor will likely start hiking rates and accepting a firmer exchange rate. Continue reading “New Bank of Israel Governor Likely to Lead to Firmer Shekel”

The Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.5%. The economy remains robust, but policymakers are likely worried about the global backdrop. The ruling junta goes into the 2019 elections in a very strong position. Continue reading “Bank of Thailand on Hold as Junta Benefits From Strong Economy Ahead of 2019 Elections”

EM FX has come under pressure again due to ongoing trade tensions and rising US rates, but saw some modest relief Friday after the PBOC announcement on FX forwards. This helped EM FX stabilize, but we do not think the negative fundamental backdrop has changed. Best performers last week were MXN, PHP, and PEN while the worst were TRY, ZAR, and KRW. Continue reading “EM Preview for the Week Ahead”

• PBOC reinstated a 20% reserve ratio for financial institutions conducting FX forward transactions
• China said it plans to slap tariffs at levels of 25%, 20%, 10%, and 5% on about $60 bln of US imports
• Reserve Bank of India hiked rates 25 bp to 6.5%, as expected
• Czech central bank adjusted many of its forecasts after hiking rates 25 bp to 1.25%
• A bipartisan group of US senators introduced legislation to impose new sanctions on Russia for continued interference in US elections
• The US imposed sanctions on two Turkish officials over the continued detention of American pastor Andrew Brunson
• Brazil COPOM tilted more dovish as it kept rates steady at 6.5%
• Banco de Mexico tilted more dovish as it kept rates steady at 7.75% Continue reading “What Has Changed in EM”