Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>Given the current uncertainties stemming from the Fed monetary tightening and Russia's invasion, trading opportunities are creeping up as short-term mispricing tend to occur in such environments.</li>
<li>One such opportunity could be the South African rand, which has outperformed on a year-to-date basis relative to other emerging market currencies.</li>
<li>I see headwinds for the rand: the carry is low in real terms and versus volatility, the current account is set to deteriorate, growth remains a concern and it's expensive.</li>
</ul>


Given the current uncertainties stemming from the Fed monetary tightening and Russia's invasion, trading opportunities are creeping up as short-term mispricing tend to occur in such environments.
One such opportunity could be the South African rand, which has outperformed on a year-to-date basis relative to other emerging market currencies.
I see headwinds for the rand: the carry is low in real terms and versus volatility, the current account is set to deteriorate, growth remains a concern and it's expensive.


South African Rand’s Outperformance Is Overdone

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<ul>
<li>Russian invasion of Ukraine on 24 Feb has generated much uncertainty and financial market volatility, including in FX markets. </li>
<li>Some asset prices have moved broadly as “expected”, with Rouble, Euro and global equities down and Dollar,  gold and fossil fuel prices up. </li>
<li>But other asset prices have been range bound in past fortnight, including S&amp;P 500, Treasury yields and a number of Asian currencies, or held their own (AUD and NZD).</li>
</ul>


Russian invasion of Ukraine on 24 Feb has generated much uncertainty and financial market volatility, including in FX markets. 
Some asset prices have moved broadly as “expected”, with Rouble, Euro and global equities down and Dollar,  gold and fossil fuel prices up. 
But other asset prices have been range bound in past fortnight, including S&amp;P 500, Treasury yields and a number of Asian currencies, or held their own (AUD and NZD).


<ul>
<li>With Russia invading Ukraine, my view of the dollar remaining strong and possibly appreciating further in the near term is playing out.</li>
<li>EM currencies have weathered the spillover from Russia and dollar strengthening well so far, but this may be about to change as their (negative) beta to the dollar has increased.</li>
<li>Beyond the near term, the outlook for the dollar and EM currencies has become hazy given the uncertainty emanating from Russia's invasion and the fallout of the sanctions.</li>
</ul>


With Russia invading Ukraine, my view of the dollar remaining strong and possibly appreciating further in the near term is playing out.
EM currencies have weathered the spillover from Russia and dollar strengthening well so far, but this may be about to change as their (negative) beta to the dollar has increased.
Beyond the near term, the outlook for the dollar and EM currencies has become hazy given the uncertainty emanating from Russia's invasion and the fallout of the sanctions.


Contagion Risks from Russia to Other EM Currencies

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Thomas Schroeder

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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

<ul>
<li>USD/RUB was a high conviction long at 75 at 81. Today's gap higher warrants a closer look at where to reduce. Next major projection lies at 112.80.</li>
<li>More importantly the knock on effect into other EM FX is unfolding. USD/BRL met our macro USD long entry point. A major USD breakout is in the works for Q2/Q3.</li>
<li>NZD and AUD short focus as risk off bets. NZD compelling bear wedge stands out.</li>
</ul>


USD/RUB was a high conviction long at 75 at 81. Today's gap higher warrants a closer look at where to reduce. Next major projection lies at 112.80.
More importantly the knock on effect into other EM FX is unfolding. USD/BRL met our macro USD long entry point. A major USD breakout is in the works for Q2/Q3.
NZD and AUD short focus as risk off bets. NZD compelling bear wedge stands out.


Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

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A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

<ul>
<li>The US market led the global equity rally as the invasion started. The long bond yields rose, and the yield curve steepened</li>
<li>European markets did well on Thursday and Friday but failed to recover as strongly as US stocks. Asia was a laggard in general.</li>
<li>I would have been more confident of the equity rally had the long bond yields rose on Friday, and the curve steepened.</li>
</ul>


The US market led the global equity rally as the invasion started. The long bond yields rose, and the yield curve steepened
European markets did well on Thursday and Friday but failed to recover as strongly as US stocks. Asia was a laggard in general.
I would have been more confident of the equity rally had the long bond yields rose on Friday, and the curve steepened.


Russia

The Russian ruble is the official currency of The Russian Federation. 

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South African Rand’s Outperformance Is Overdone

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Gautam Jain, PhD, CFA

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Olivier Desbarres

Contagion Risks from Russia to Other EM Currencies

EM currencies have weathered the dollar strengthening well so far, but this may be about to change as their (negative) beta to the dollar has...

Gautam Jain, PhD, CFA

USD/RUB Long Lock in Zone

USD/RUB was a high conviction long at 75 at 81. Today's gap higher warrants a closer look at where to reduce. Next major projection lies at 112.80.

Thomas Schroeder

Buy at the Sound of Cannons

The US market led the global equity rally as the invasion started. The long bond yields rose, and the yield curve steepened

Untying The Gordian Knot

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