EM Preview for the Week Ahead

EM currencies are coming off a solid week. The dollar remains on its back foot after the Fed delivered a dovish hold and US economic data continue to soften. Broad-based dollar weakness is likely to continue this week, and EM currencies should once again take advantage of this. That said, we continue to see divergences. TRY and BRL are likely to continue underperforming, while the Asian currencies should continue to outperform due to strong fundamentals. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM currencies were mixed last week as the dollar got some traction against the major currencies. We think the dollar is likely to come under broad-based pressure this week as the FOMC is likely to re-emphasize its ultra-dovish stance established at Jackson Hole. EM FX should benefit but divergences should continue. US data is also likely to continue sequentially weakening. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM performance this week will hinge crucially on whether US equity markets can find some traction. If sustained, last week’s equity rout could lead to a deeper generalized risk-off trading environment this week that would weigh on EM FX and equities. As it is, markets are already digesting weaker economic data and rising virus numbers in countries that had crushed the curve. ECB meeting this week may hint at further easing to come, which could help risk assets recover a bit. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM FX has taken advantage of broad dollar weakness, with most currencies gaining last week. ARS, TRY, and HUF were the exceptions, not surprisingly. Given the dovish message delivered by Powell at Jackson Hole last week, we expect EM and other risk assets to continue rallying. The US jobs data Friday may provide a gut check, but until then, the party continues. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM had a mixed week and we continue to believe divergences will remain in place. Please see our recent piece “Where Has All the Carry Gone?” for our most recent take in EM currencies. Continue reading “EM Preview for the Week Ahead”

Where Has All the Carry Gone?

Despite broad-based dollar weakness, EM currencies have not fully participated in the risk on environment that’s now in place. The good news is that fundamentals matter again. The bad news is that there are a lot of EM countries with bad fundamentals, and the secular decline in carry no longer gives these weaklings any cover. Here, we posit that fundamentals will be the main driver for currencies in this new normal of near zero interest rates everywhere. Continue reading “Where Has All the Carry Gone?”

Restricted Market Trading Comments

At the open this week, we continue to see very little changes to market status. Indonesia announced extensions to both securities settlement and cash payment deadlines however FX cut-offs remain unchanged. Nigeria also sees no change to their liquidity issues as repatriation queues continue to grow. Continue reading “Restricted Market Trading Comments”