Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

With the Fed turning hawkish, the pressure on EM central banks to do the same has increased. In this note, we identify the countries where 2s5s slopes can flatten as rate hikes get priced in earlier than before.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

With the Fed turning hawkish, the pressure on EM central banks to do the same has increased. In this note, we identify the countries where 2s5s slopes can flatten as rate hikes get priced in earlier than before.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Which EM Countries to Target for 2s5s Flatteners?

We examine the EM FX space for opportunities in the aftermath of the hawkish FOMC meeting last week which led to a sharp rise in the US dollar. Two currencies that have underperformed and stand out as buying opportunities are the Chilean peso (CLP) and the Romanian leu (RON).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 examine the EM FX space for opportunities in the aftermath of the hawkish FOMC meeting last week which led to a sharp rise in the US dollar. Two currencies that have underperformed and stand out as buying opportunities are the Chilean peso (CLP) and the Romanian leu (RON).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: Did the Dollar Spike Create Opportunities in EM FX?

The US dollar has strengthened on the back of the hawkish Fed, hurting Asian currencies across the board but the Singapore dollar (SGD) more so than the Indonesian rupiah (IDR), allowing us to take profit on our Long IDR vs Short SGD trade recommendation.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 strengthened on the back of the hawkish Fed, hurting Asian currencies across the board but the Singapore dollar (SGD) more so than the Indonesian rupiah (IDR), allowing us to take profit on our Long IDR vs Short SGD trade recommendation.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: Take Profit on Long Indonesian Rupiah Vs Short Singapore Dollar Recommendation

Economist, Centennial Asia Advisors

Nicholas Chia

Economist

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<ul style="list-style-type: square;">
<li>Core inflation leapt to a multi-year high in May, which is at odds with the desultory growth outlook and still-sizeable economic slack.</li>
<li>A closer examination of the inflation print suggests that lockdowns were partially responsible for rising prices. As they come off by July, this should provide some respite from stirring prices.</li>
<li>But that is not to say that prices will tail off sharply. Instead, other factors will keep prices pressures elevated – firm global goods inflation, Rupee <a href="https://www.smartkarma.com/entities/inr" target="_blank" data-smartkarma-citation="entities:22832:1" rel="noopener">INR (USDINR CURNCY)</a>  weakness, higher oil and CPO prices, etc. In turn, CPI inflation is more likely to remain tilted to the upper end of the RBI's target corridor (2%-6%).</li>
<li>This leaves the RBI in a pickle. If prices show no sign of moderating, the central bank will have to contemplate an earlier-than-envisaged tightening of monetary conditions from 4Q21.</li>
</ul>


Core inflation leapt to a multi-year high in May, which is at odds with the desultory growth outlook and still-sizeable economic slack.
A closer examination of the inflation print suggests that lockdowns were partially responsible for rising prices. As they come off by July, this should provide some respite from stirring prices.
But that is not to say that prices will tail off sharply. Instead, other factors will keep prices pressures elevated – firm global goods inflation, Rupee INR (USDINR CURNCY)  weakness, higher oil and CPO prices, etc. In turn, CPI inflation is more likely to remain tilted to the upper end of the RBI's target corridor (2%-6%).
This leaves the RBI in a pickle. If prices show no sign of moderating, the central bank will have to contemplate an earlier-than-envisaged tightening of monetary conditions from 4Q21.


India Inflation: More To It Than Meets The Eye

In this week’s Alpha Bites, we recommend buying the Indian rupee (INR) against the Korean won (KRW), using the latter as a proxy for a basket of Asian currencies. The underperformance of the rupee against its peers appears overdone as the impact on the economic recovery from the deadly second wave of the coronavirus has been less severe than feared. Moreover, there has been a broad-based rise in inflation, which should challenge the central bank’s dovish bias as well as its currency interventions.

In this week’s Alpha Bites, we recommend buying the Indian rupee (INR) against the Korean won (KRW), using the latter as a proxy for a basket of Asian currencies. The underperformance of the rupee against its peers appears overdone as the impact on the economic recovery from the deadly second wave of the coronavirus has been less severe than feared. Moreover, there has been a broad-based rise in inflation, which should challenge the central bank’s dovish bias as well as its currency interventions.

Alpha Bites: Long Indian Rupee Vs Short Korean Won

India

The Indian rupee is the official currency of India. 

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INR (USDINR CURNCY)

Rates 10y Dashboard: Which EM Countries to Target for 2s5s Flatteners?

With the Fed turning hawkish, we identify the EM countries where 2s5s slopes can flatten as rate hikes get priced in earlier than before.

Gautam Jain, PhD, CFA

FX Dashboard: Did the Dollar Spike Create Opportunities in EM FX?

We examine the EM FX space for opportunities in the aftermath of the hawkish FOMC meeting last week which led to a sharp rise in the US dollar.

Gautam Jain, PhD, CFA

FX Dashboard: Take Profit on Long Indonesian Rupiah Vs Short Singapore Dollar Recommendation

The US dollar has strengthened on the back of the hawkish Fed, hurting SGD more than IDR, allowing us to take profit on our Long IDR vs Short SGD...

Gautam Jain, PhD, CFA

India Inflation: More To It Than Meets The Eye

inflation leapt to a 6-month high in May, which is at odds with the still-sizeable slack in demand. Supply-side dynamics were clearly at work, and...

Nicholas Chia

Alpha Bites: Long Indian Rupee Vs Short Korean Won

We expect INR to make up for its underperformance as growth has been less impacted than feared and sharply rising inflation challenges RBI’s dovish...

Gautam Jain, PhD, CFA

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52-week Range

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