Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this note, we discuss the currencies that can perform well even if, following the sharp depreciation over the past two months, the US dollar becomes rangebound, taking away the impetus for EM currencies to appreciate on aggregate.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

In this note, we discuss the currencies that can perform well even if, following the sharp depreciation over the past two months, the US dollar becomes rangebound, taking away the impetus for EM currencies to appreciate on aggregate.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: EM Currencies to Target in the Late Recovery Phase

Despite its recent underperformance, we reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start tightening monetary policy this year. In our view, the concerns regarding the upcoming change at the helm of the central bank are overstated.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

Despite its recent underperformance, we reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start tightening monetary policy this year. In our view, the concerns regarding the upcoming change at the helm of the central bank are overstated.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Stay Bullish on Mexican Peso

The US dollar has weakened since the end of March, leaving it flat from the start of the year. If the dollar moves sideways for the time being, as we expect, then it should lead to a carry trade environment. We identify the best EM currencies for such an environment.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

The US dollar has weakened since the end of March, leaving it flat from the start of the year. If the dollar moves sideways for the time being, as we expect, then it should lead to a carry trade environment. We identify the best EM currencies for such an environment.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Which Currencies to Target in a Carry Trade Environment?

In this note, we go over the currencies that have outperformed and underperformed in the recent bout of the rally for EM currencies along with the reasoning behind their performances and their outlooks.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

In this note, we go over the currencies that have outperformed and underperformed in the recent bout of the rally for EM currencies along with the reasoning behind their performances and their outlooks.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Winners and Losers in the EM Turnaround

Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

The Federal Reserve has in the past six weeks diligently stuck to its “patience until substantial further progress is seen” monetary policy mantra. Its “reward” has been range-bound US Treasury yields, a slowly depreciating Dollar and a metronomic rise in US equity indices, with all three financial markets exhibiting only modest volatility.Since 19th April the Dollar NEER has depreciated a further 0.6% to within striking distance of a 14-week low, in line with “our core scenario that the Dollar will indeed lose further ground”. We remain bearish the US Dollar, a theme we will explore in greater detail in forthcoming FIRMS reports.Fed Chairperson Powell would argue that keeping US Treasury yields in check has been a worthy achievement given the backdrop of President Biden’s ambitious fiscal stimulus plans and accelerating US economic growth and rising domestic and global inflation. A GDP-weighted measure of headline CPI-inflation in 32 major economies rose to 2.1% yoy in March from 1.4% yoy in February, the largest monthly increase since December 2009. But core CPI-inflation in developed economies rose only marginally in Q1 2021, with the rate of inflation in March of 1.2% yoy below its 10-year average of 1.5% yoy.While backward looking these data they may explain in part why developed central banks, with the exception of Bank of Canada, have so far felt justified in keeping their policy rates on hold and the modalities of their asset-purchase programs broadly unchanged. In the past month currencies in Emerging Europe, Africa and Latin America have been main beneficiaries of still reasonably low US yields, weakening Dollar, burgeoning global growth and robust risk appetite. The timing of this EM rebound has coincided with our forecasts.Non-Japan Asian currencies have lagged, which we attribute in part to portfolio outflows and NJA central banks keeping a close eye on a flat-lining Chinese Renminbi.This differentiated EM currency rally will extend near-term, in our view, but high-yielding EM currencies in particular remain vulnerable to any spikes in US and other developed market government bond yields and more generally market volatility.

The Federal Reserve has in the past six weeks diligently stuck to its “patience until substantial further progress is seen” monetary policy mantra. Its “reward” has been range-bound US Treasury yields, a slowly depreciating Dollar and a metronomic rise in US equity indices, with all three financial markets exhibiting only modest volatility.Since 19th April the Dollar NEER has depreciated a further 0.6% to within striking distance of a 14-week low, in line with “our core scenario that the Dollar will indeed lose further ground”. We remain bearish the US Dollar, a theme we will explore in greater detail in forthcoming FIRMS reports.Fed Chairperson Powell would argue that keeping US Treasury yields in check has been a worthy achievement given the backdrop of President Biden’s ambitious fiscal stimulus plans and accelerating US economic growth and rising domestic and global inflation. A GDP-weighted measure of headline CPI-inflation in 32 major economies rose to 2.1% yoy in March from 1.4% yoy in February, the largest monthly increase since December 2009. But core CPI-inflation in developed economies rose only marginally in Q1 2021, with the rate of inflation in March of 1.2% yoy below its 10-year average of 1.5% yoy.While backward looking these data they may explain in part why developed central banks, with the exception of Bank of Canada, have so far felt justified in keeping their policy rates on hold and the modalities of their asset-purchase programs broadly unchanged. In the past month currencies in Emerging Europe, Africa and Latin America have been main beneficiaries of still reasonably low US yields, weakening Dollar, burgeoning global growth and robust risk appetite. The timing of this EM rebound has coincided with our forecasts.Non-Japan Asian currencies have lagged, which we attribute in part to portfolio outflows and NJA central banks keeping a close eye on a flat-lining Chinese Renminbi.This differentiated EM currency rally will extend near-term, in our view, but high-yielding EM currencies in particular remain vulnerable to any spikes in US and other developed market government bond yields and more generally market volatility. 

China

The Chinese renminbi (yuan) is the official currency of The People's Republic of China. 

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FX Dashboard: EM Currencies to Target in the Late Recovery Phase

In this note, we discuss the currencies that can perform well even if the US dollar becomes rangebound going forward, taking away the impetus for...

Gautam Jain, PhD, CFA

FX Dashboard: Stay Bullish on Mexican Peso

We reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start...

Gautam Jain, PhD, CFA

FX Dashboard: Which Currencies to Target in a Carry Trade Environment?

If the dollar moves sideways for the time being, as we expect, then it should lead to a carry trade environment. We identify the best EM currencies...

Gautam Jain, PhD, CFA

FX Dashboard: Winners and Losers in the EM Turnaround

We go over the currencies that have outperformed and underperformed in the recent bout of the rally for EM currencies along with the reasoning...

Gautam Jain, PhD, CFA

Something Has Got to Give

Treasury yields have been range-bound despite global backdrop of stronger growth and rising inflation. USD weaker, equities and (most) EM...

Olivier Desbarres

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