Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

Following the recent rally in the Indian rupee, we assess that there is more upside in the currency but suggest targeting a better entry point as uncertainties remain.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.

Following the recent rally in the Indian rupee, we assess that there is more upside in the currency but suggest targeting a better entry point as uncertainties remain.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: Does the Indian Rupee Have More Room to Run?

We recommend staying away from the lira despite the high carry and attractive valuations as it is being weighed down by the risk of the central bank easing too early, a high current account deficit, low international reserves, and high short-term foreign debt.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.

We recommend staying away from the lira despite the high carry and attractive valuations as it is being weighed down by the risk of the central bank easing too early, a high current account deficit, low international reserves, and high short-term foreign debt.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: Avoid the Lira as Turkey Remains Mired in a Crisis

In this note, we show that EM FX and USD have converged to their long-term trends in REER terms, indicating that they are close to fair valuations. However, there is considerable differentiation within EM, providing attractive relative-value opportunities.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 show that EM FX and USD have converged to their long-term trends in REER terms, indicating that they are close to fair valuations. However, there is considerable differentiation within EM, providing attractive relative-value opportunities.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 FX Is Fair in REER Terms but Differentiation Abounds

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

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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 Fed updated “dot-chart” of all FOMC members’ expectations of the appropriate policy rate points to only an incrementally less dovish stance. Based on a weighted average FOMC members still only expect one 25bp hike by end-2023, according to our estimates.Fed seems eager to cool market concerns that it will have no choice but to start hiking rates and to ultimately cap Treasury yields or at least slow recent increase in long-end yields. Price action in 2 and 5-year Treasuries suggests it partly succeeded, even if briefly.However, this still very dovish Fed policy rate outlook jars with its updated forecasts for US inflation and particularly GDP growth. The Fed’s twin arguments are that rapid growth this year will not be very inflationary due to slack in labour market and that following a period of inflation-undershoot it’s willing to accept a modest overshoot in PCE-inflation above 2%. The latter will have come as little surprise. The more contentious issue in our view is the Fed’s prognosis that core PCE-inflation will rise only modestly from 1.5% yoy in January to 2.2% yoy by end-year despite US GDP growth hitting a 37-year high of 6.5% this year.The Treasury yield curves have steepened further in the past 72 hours. This suggests that bond markets are not convinced about the Fed’s macro/policy matrix or that the Fed’s pick-up in Treasury purchases in the past couple of months will prove sufficient.Moreover, the 6.9% collapse in crude oil price yesterday and correction in US equities (particularly the more risk-sensitive Nasdaq) are clear pointers that markets remain concerned about the impact of higher US yields on global demand and equity valuations.FX markets have been more sanguine. Global FX volatility has risen in past 72 hours but remains in line with 10-year average and most currencies, particularly in Asia, have moved little. The safe-haven Dollar has proven relatively resilient, in line with our February view. While the Russian Rouble has (perhaps unsurprisingly) weakened most, most other high-yielding emerging market currencies have outperformed, thanks in large part to greater-than-expected central bank rate hikes in Brazil and Turkey of respectively 75bp and 200bp.  The risk now is that markets redouble their attention on central banks perceived as being “behind the curve”. These include the Norges Bank and CE3 central banks in our view.

The Fed updated “dot-chart” of all FOMC members’ expectations of the appropriate policy rate points to only an incrementally less dovish stance. Based on a weighted average FOMC members still only expect one 25bp hike by end-2023, according to our estimates.Fed seems eager to cool market concerns that it will have no choice but to start hiking rates and to ultimately cap Treasury yields or at least slow recent increase in long-end yields. Price action in 2 and 5-year Treasuries suggests it partly succeeded, even if briefly.However, this still very dovish Fed policy rate outlook jars with its updated forecasts for US inflation and particularly GDP growth. The Fed’s twin arguments are that rapid growth this year will not be very inflationary due to slack in labour market and that following a period of inflation-undershoot it’s willing to accept a modest overshoot in PCE-inflation above 2%. The latter will have come as little surprise. The more contentious issue in our view is the Fed’s prognosis that core PCE-inflation will rise only modestly from 1.5% yoy in January to 2.2% yoy by end-year despite US GDP growth hitting a 37-year high of 6.5% this year.The Treasury yield curves have steepened further in the past 72 hours. This suggests that bond markets are not convinced about the Fed’s macro/policy matrix or that the Fed’s pick-up in Treasury purchases in the past couple of months will prove sufficient.Moreover, the 6.9% collapse in crude oil price yesterday and correction in US equities (particularly the more risk-sensitive Nasdaq) are clear pointers that markets remain concerned about the impact of higher US yields on global demand and equity valuations.FX markets have been more sanguine. Global FX volatility has risen in past 72 hours but remains in line with 10-year average and most currencies, particularly in Asia, have moved little. The safe-haven Dollar has proven relatively resilient, in line with our February view. While the Russian Rouble has (perhaps unsurprisingly) weakened most, most other high-yielding emerging market currencies have outperformed, thanks in large part to greater-than-expected central bank rate hikes in Brazil and Turkey of respectively 75bp and 200bp.  The risk now is that markets redouble their attention on central banks perceived as being “behind the curve”. These include the Norges Bank and CE3 central banks in our view.

EM Currencies: Central Bank Friends and Foes

Hungary

The Hungarian forint is the official currency of the Republic of Hungary. The US Dollar is the official currency of Unites States of America.

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HUF (USDHUF CURNCY)

FX Dashboard: Does the Indian Rupee Have More Room to Run?

Following the recent rally in the Indian rupee, we assess that there is more upside in the currency but suggest targeting a better entry point as...

Gautam Jain, PhD, CFA

FX Dashboard: Avoid the Lira as Turkey Remains Mired in a Crisis

We recommend staying away from the lira despite the high carry and attractive valuations as it is being weighed down by the risk of the central...

Gautam Jain, PhD, CFA

FX Dashboard: EM FX Is Fair in REER Terms but Differentiation Abounds

We show that USD and EM FX on aggregate are close to fair valuations in REER terms. However, there is considerable differentiation within EM,...

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

EM Currencies: Central Bank Friends and Foes

Fed's updated "dot chart" + forecasts and asset purchases have not convinced bond, equity or crude oil markets. FX reaction more sanguine but...

Olivier Desbarres

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