Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

The first round of Peru's presidential election has produced a negative outcome with a leftist candidate headed to a second round against a right-wing candidate with a high rejection rate. However, with the currency already reflecting these risks combined with record levels of international reserves, a buying opportunity could open up before the second round.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.

The first round of Peru's presidential election has produced a negative outcome with a leftist candidate headed to a second round against a right-wing candidate with a high rejection rate. However, with the currency already reflecting these risks combined with record levels of international reserves, a buying opportunity could open up before the second round.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: Peru’s Currency and Rates Are Already Reflecting Election Risk

We discuss the current positioning in the dollar, which has gone from heavy short to close to flat now, based on CFTC data, and its implications for future dollar moves.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.

We discuss the current positioning in the dollar, which has gone from heavy short to close to flat now, based on CFTC data, and its implications for future dollar moves.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: Short Dollar Positions Have Been Cleaned Up

In this note, we go over the reasons that Latin American currencies have started outperforming against their Asian counterparts, a trend we expect to continue with a range-bound dollar.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 go over the reasons that Latin American currencies have started outperforming against their Asian counterparts, a trend we expect to continue with a range-bound dollar.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: LatAm FX Has Started Outperforming Against Asia FX

In this note, we evaluate whether hedging with the euro would have helped ameliorate losses from EM currencies over the past couple of months stemming from the spillover from rising US rates.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 evaluate whether hedging with the euro would have helped ameliorate losses from EM currencies over the past couple of months stemming from the spillover from rising US rates.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: How Well Would a Euro Hedge Have Worked for EM?

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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.

Non-Japan Asian (NJA) central banks’ foreign currency (FX) reserves have gradually increased since end-March 2020, arguably the peak in global risk aversion.We estimate that the aggregate US Dollar-value of FX reserves in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand increased by about $514bn or 10% in the eleven months to end-February 2021 to about $5.66 trillion. This was just $122bn short of all the all-time high recorded in June-2014.Adjusting for currency-valuation effects – the appreciation of other major reserve currencies versus the US Dollar – we estimate that these NJA central banks’ FX reserves increased by about $342bn or 6.4%. As a percentage of GDP, this increase amounted to about 1.5% for NJA, ranging from only 0.3% in China to nearly 28% in Singapore. While realised investment gains on these central banks’ holdings and other official transactions may have inflated this increase in FX reserves, it was at least partly the result of central banks’ intervention in the FX market (i.e. buying foreign currency), in our view. Importantly, NJA central banks rightly attach greater importance to their currencies’ more relevant Nominal Effective Exchange Rates (NEERs), when setting their exchange rate and interest rate policies, than to their currency’s bilateral exchange rates, in our view.In the past 11 months NJA central banks have continued to show an ability and willingness to both limit daily FX volatility and influence their NEERs’ medium-term directionality.FX reserve accumulation has either capped the pace of appreciation (CNY, IDR, KRW, THB, TWD) or contributed to (albeit modest in most cases) NEER depreciation (INR, MYR, PHP) with NJA central banks seemingly intent on maintaining export competitiveness and limiting imported deflation. The Singapore Dollar NEER was unchanged over this period.Of course the past and future performance of individual currencies is conditioned by both the magnitude of central bank FX intervention AND current account and capital account flows (and the underlying factors behind these policies and FX flows) – the topic of Part Two of this FIRMS report.

Non-Japan Asian (NJA) central banks’ foreign currency (FX) reserves have gradually increased since end-March 2020, arguably the peak in global risk aversion.We estimate that the aggregate US Dollar-value of FX reserves in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand increased by about $514bn or 10% in the eleven months to end-February 2021 to about $5.66 trillion. This was just $122bn short of all the all-time high recorded in June-2014.Adjusting for currency-valuation effects – the appreciation of other major reserve currencies versus the US Dollar – we estimate that these NJA central banks’ FX reserves increased by about $342bn or 6.4%. As a percentage of GDP, this increase amounted to about 1.5% for NJA, ranging from only 0.3% in China to nearly 28% in Singapore. While realised investment gains on these central banks’ holdings and other official transactions may have inflated this increase in FX reserves, it was at least partly the result of central banks’ intervention in the FX market (i.e. buying foreign currency), in our view. Importantly, NJA central banks rightly attach greater importance to their currencies’ more relevant Nominal Effective Exchange Rates (NEERs), when setting their exchange rate and interest rate policies, than to their currency’s bilateral exchange rates, in our view.In the past 11 months NJA central banks have continued to show an ability and willingness to both limit daily FX volatility and influence their NEERs’ medium-term directionality.FX reserve accumulation has either capped the pace of appreciation (CNY, IDR, KRW, THB, TWD) or contributed to (albeit modest in most cases) NEER depreciation (INR, MYR, PHP) with NJA central banks seemingly intent on maintaining export competitiveness and limiting imported deflation. The Singapore Dollar NEER was unchanged over this period.Of course the past and future performance of individual currencies is conditioned by both the magnitude of central bank FX intervention AND current account and capital account flows (and the underlying factors behind these policies and FX flows) – the topic of Part Two of this FIRMS report. 

Non-Japan Asia: NEERs and FX Intervention

Malaysia

The Malaysian ringgit is the official currency of the Federation of Malaysia. 

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FX Dashboard: Peru’s Currency and Rates Are Already Reflecting Election Risk

The first round of Peru's presidential election has produced a negative outcome. However, with the currency already reflecting these risks, a...

Gautam Jain, PhD, CFA

FX Dashboard: Short Dollar Positions Have Been Cleaned Up

We discuss the current positioning in the dollar, which has gone from heavy short to close to flat now, based on CFTC data, and its implications...

Gautam Jain, PhD, CFA

FX Dashboard: LatAm FX Has Started Outperforming Against Asia FX

In this note, we go over the reasons that Latin American currencies have started outperforming against their Asian counterparts, a trend we expect...

Gautam Jain, PhD, CFA

FX Dashboard: How Well Would a Euro Hedge Have Worked for EM?

In this note, we evaluate whether hedging with the euro would have helped ameliorate losses from EM currencies over the past couple of months...

Gautam Jain, PhD, CFA

Non-Japan Asia: NEERs and FX Intervention

Non-Japan Asian central banks have in past year intervened in FX market to cap FX volatility, protect export competitiveness and limit imported...

Olivier Desbarres

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