Risk assets are coming off a tough week. The dollar was bid across the board except for the yen, which outperformed slightly. The only EM currencies to gain against the dollar were KRW and CLP. The major US equity indices somehow managed to eke out very modest gains but stock markets across Europe sank as the viral spread threatens to slam economic activity again. Yet we have seen time and time again that the safe haven bid for the dollar eventually gives way to broad-based dollar weakness and we expect that to happen this week. Strong China growth in Q3 is expected to underpin risk sentiment and this should help EM gain some traction.  Continue reading “EM Preview for the Week Ahead”

Most of EM is taking advantage of recent broad dollar weakness. Only TRY, CLP, and ARS lost ground against the dollar last week, while the biggest gainers were BRL, MXN, and RUB. We expect the dollar to remain under pressure this week, which should allow EM currencies with solid fundamentals to rally further. As always, we look for divergences within EM. Continue reading “EM Preview for the Week Ahead”

EM currencies benefited from another week of broad-based dollar weakness. However, divergences continue to be seen within EM. The worst performers were BRL, ARS, and TRY, all down against the dollar even as most of EM gained. As the election gets closer and uncertainty regarding the US political outlook rises, we believe EM will be subject to ongoing bouts of volatility and risk off impulses. Continue reading “EM Preview for the Week Ahead”

Persistent risk-off impulses weighed on EM last week and that may continue this week. The Asian currencies outperformed last week while MXN, ZAR, and COP underperformed, and we expect these divergences to continue. Despite optimism about a stimulus package in the US, we think it remains a long shot. Meanwhile, virus numbers are rising in Europe and the US, with data from both regions likely to continue weakening. Continue reading “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 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 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”