Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this week’s Alpha Bites, we recommend going long the Chilean peso (CLP) against the Australian dollar (AUD) in a beta-neutral ratio. The Chilean peso has outperformed its EM peers but has lagged the rally in copper. Instead of funding CLP in dollars, we prefer the Australian dollar to partly hedge the commodity risk as both Chile and Australia are major metal exporters.

In this week’s Alpha Bites, we recommend going long the Chilean peso (CLP) against the Australian dollar (AUD) in a beta-neutral ratio. The Chilean peso has outperformed its EM peers but has lagged the rally in copper. Instead of funding CLP in dollars, we prefer the Australian dollar to partly hedge the commodity risk as both Chile and Australia are major metal exporters.

Alpha Bites: Long Chilean Peso Vs Short Australian Dollar

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Two weeks ago in a note titled <a href="https://www.smartkarma.com/insights/commodity-currencies-and-their-warnings" target="_blank" data-smartkarma-citation="insights:49691" rel="noopener">Commodity Currencies and Their Warnings</a> we examined their short term setups and potential declines (mainly against the USD)This was largely on the back of a slip in the Oil price and long term levels being tested on major commodity indices. A lot of the indications in that note are still valid.Since then, we see fresh indications that yields will likely slip too which brings some JPY crosses into focus. While there have not been any breaks as yet, key levels on AUDJPY and CADJPY should be watched closely.

Two weeks ago in a note titled Commodity Currencies and Their Warnings we examined their short term setups and potential declines (mainly against the USD)This was largely on the back of a slip in the Oil price and long term levels being tested on major commodity indices. A lot of the indications in that note are still valid.Since then, we see fresh indications that yields will likely slip too which brings some JPY crosses into focus. While there have not been any breaks as yet, key levels on AUDJPY and CADJPY should be watched closely.

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>A new currency regime in Asia?</li>
<li>Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM</li>
<li>Rather EM enjoying best forex reserve growth for a decade</li>
<li>
De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization</li>
<li>Loose US fiscal and monetary policies are more likely to spill-over into EM</li>
</ul>


A new currency regime in Asia?
Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM
Rather EM enjoying best forex reserve growth for a decade

De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization
Loose US fiscal and monetary policies are more likely to spill-over into EM


Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

Whichever commodity index we look at, there are decent long term levels that are now limiting gains. While a major trend change is unlikely, a near term meaningful correction down is certainly the risk. Consequently, commodity currencies are also vulnerable in the short term.This all lines up with indications that financial markets as a whole are going through a notable bump as we enter Q2.

Whichever commodity index we look at, there are decent long term levels that are now limiting gains. While a major trend change is unlikely, a near term meaningful correction down is certainly the risk. Consequently, commodity currencies are also vulnerable in the short term.This all lines up with indications that financial markets as a whole are going through a notable bump as we enter Q2.

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the central bank, taking the real rate to a high positive level.The attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the central bank, taking the real rate to a high positive level.The attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

Australia

The Australian dollar is the official currency of the Commonwealth of Australia.

Price Gauge
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AUD (USDAUD CURNCY)

Alpha Bites: Long Chilean Peso Vs Short Australian Dollar

We recommend going long the Chilean peso (CLP) against the Australian dollar (AUD) in a beta-neutral ratio. The Chilean peso has outperformed its...

Gautam Jain, PhD, CFA

Commodity Currencies and the JPY

The three charts of US 10Y yield with USDJPY, AUDJPY and CADJPY are all giving early warning signs that lower levels could be seen. Watch these levels

Shyam Devani

Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

Asian cross-currency volatility is at its all-time low. A de facto Euro-like unit is forming. This could be hugely bullish for Emerging Markets

Michael J. Howell

Commodity Currencies and Their Warnings

Every major commodities index is hitting key long term levels and showing signs of stalling. It is no surprise then that bearish indications and...

Shyam Devani

FX Dashboard: Lira Re-Engages with EM

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)