Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

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

In this note, we argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro rather than reducing it.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 argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro rather than reducing it.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: Hedge EM Currencies with Euro as Volatility Rises

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Olivier Desbarres

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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 past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets – remain firmly within their multi-week ranges while the S&amp;P 500 yesterday closed in the middle of a narrow 3-week range of just 1.8%. US markets are seemingly sitting on the fence at this juncture, unwilling to take material directional positions given the uncertain outlook for US and global inflation and central banks’ reaction functions.  However, the gradual 6bp fall in the US benchmark 10-year Treasury yield between 29th April and 5th May to about 1.58% and the flattening of the 2s5s and 2s10s yield curves alongside a 0.4% gain in the Dollar NEER is noteworthy.Our take is that markets may have become marginally less worried that the Fed will have no choice but to tighten monetary policy sooner than it has indicated despite expectations that year-on-year US CPI-inflation will rise further in coming months. Moreover, the inverse relationship between the “safe-haven” Dollar and riskier assets has remained strong. US macro data released in the past week have been strong enough to put a floor under the S&amp;P 500 but not strong enough to push it to new highs. Finally we think that markets, in particular real-money funds, have once again been paying greater attention to valuations, including the relative cheapness of the Dollar.Notably most of the other major NEERs have also traded in narrow ranges since early March and few have moved much in the past month. Central banks, particularly in Asia, have been willing and able to keep their currencies on a short leash in order to maintain export competitiveness and minimise inflationary or deflationary pressures.Within Asia, the Taiwan Dollar is looking expensive relative to the Korean Won, in our view.

The past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets – remain firmly within their multi-week ranges while the S&amp;P 500 yesterday closed in the middle of a narrow 3-week range of just 1.8%. US markets are seemingly sitting on the fence at this juncture, unwilling to take material directional positions given the uncertain outlook for US and global inflation and central banks’ reaction functions.  However, the gradual 6bp fall in the US benchmark 10-year Treasury yield between 29th April and 5th May to about 1.58% and the flattening of the 2s5s and 2s10s yield curves alongside a 0.4% gain in the Dollar NEER is noteworthy.Our take is that markets may have become marginally less worried that the Fed will have no choice but to tighten monetary policy sooner than it has indicated despite expectations that year-on-year US CPI-inflation will rise further in coming months. Moreover, the inverse relationship between the “safe-haven” Dollar and riskier assets has remained strong. US macro data released in the past week have been strong enough to put a floor under the S&amp;P 500 but not strong enough to push it to new highs. Finally we think that markets, in particular real-money funds, have once again been paying greater attention to valuations, including the relative cheapness of the Dollar.Notably most of the other major NEERs have also traded in narrow ranges since early March and few have moved much in the past month. Central banks, particularly in Asia, have been willing and able to keep their currencies on a short leash in order to maintain export competitiveness and minimise inflationary or deflationary pressures.Within Asia, the Taiwan Dollar is looking expensive relative to the Korean Won, in our view.

Sitting on Range-Trade Fence: Complacent Comfort

In this note, we discuss the rise in volatility for Latin American currencies especially relative to their carry. The low carry relative to the volatility puts the accommodative monetary policies in Peru and Colombia at risk in our view.Separately, 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 this note, we discuss the rise in volatility for Latin American currencies especially relative to their carry. The low carry relative to the volatility puts the accommodative monetary policies in Peru and Colombia at risk in our view.Separately, 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.

FX Dashboard: High Volatility Relative to Carry Weighing on LatAm Currencies

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Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

USD shows lead lows versus IDR, THB and INR that are trending higher already ahead of the likes of the SGD and KRW. USD/ZAR is making a macro low near 14 that has our attention and will see the EM complex follow this lead.DXY staged an impressive reversal Friday off of the 90.40 buy support (trendline and price) but our attention is centered around more bullish macro signals unfolding in the weekly cycle.A dollar low align nicely with our call for an SPX top near wedge line resistance. Short have been recommended in EEM and EWZ on the back of a USD low and rally cycle.

USD shows lead lows versus IDR, THB and INR that are trending higher already ahead of the likes of the SGD and KRW. USD/ZAR is making a macro low near 14 that has our attention and will see the EM complex follow this lead.DXY staged an impressive reversal Friday off of the 90.40 buy support (trendline and price) but our attention is centered around more bullish macro signals unfolding in the weekly cycle.A dollar low align nicely with our call for an SPX top near wedge line resistance. Short have been recommended in EEM and EWZ on the back of a USD low and rally cycle.

Brazil

The Brazilian real is the official currency of the Federative Republic of Brazil.  

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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

FX Dashboard: Hedge EM Currencies with Euro as Volatility Rises

In this note, we argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro...

Gautam Jain, PhD, CFA

Sitting on Range-Trade Fence: Complacent Comfort

Vol & directionality in Dollar, Treasuries and S&P 500 modest in past week and most EM currencies remain rangebound. Markets sitting on fence, but...

Olivier Desbarres

FX Dashboard: High Volatility Relative to Carry Weighing on LatAm Currencies

The volatility of LatAm currencies has risen especially relative to their carry. The low carry relative to the volatility puts the accommodative...

Gautam Jain, PhD, CFA

USD Low Ties in with Risk Peak

DXY staged an impressive reversal Friday off of the 90.40 buy support (trendline and price) but our attention is centered around more bullish macro...

Thomas Schroeder

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