EM FX Weekly: Mixed at best

Focused on the Client Size does not matter. The information is anonymous i. We remain cautious, as explained below. Trade over Instruments. A comparison of specific US treasuries and individual Indonesian and South African USD denominated sovereign bonds expiring in argue the same credit spread story, as the South African-US spread compressed some 20 basis points, while the Indonesian one widened 17 bps since the last trading day of We may obtain information about you by accessing cookies, sent by our website. Your capital is at risk.

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What are we waiting for? As noted above, the attempted return of the Goldilocks trade has done very little for EM currencies. We continue to see risks that EM currencies in broad terms are a bit richly valued. We are concerned that the global cyclical upswing may have peaked for the cycle, with China and the US most at risk of slowdown in the months ahead and a repricing of much of EM FX an ongoing risk.

Sounds like a bit of a lose-lose for EM unless we are wrong on where we are in the economic cycle. Media reports the situation as if it is merely the pressure from the local rates versus US rates carry trade — but surely there is more afoot?

After all, the USD should be rising even more so against other currencies from a carry-trade perspective. Another issue that has cropped up in recent weeks is the Libor-OIS spread, which has widened to some 44 basis points over the last several weeks to its widest level since the global financial crisis. This could be a very technically driven issue, but it bears watching if it becomes a focal point, as EM should be generally sensitive to USD funding.

Recent and longer term, carry-adjusted Chart: The worst performer in the one-month category is the Indonesian rupiah IDR , our spotlight currency for this week. There could be linkages to the recent protectionist theme as bond portfolio managers look at their risks in EM. Saxo Bank Spotlight currency this week: IDR Indonesian Rupiah weak despite supportive backdrop We noted above the general alignment of Asian EM FX with current account considerations over the last several months to a year, at least if we are to believe the developments in our small universe of Asian currencies.

Bloomberg The weak performance for the Indonesian rupiah is somewhat remarkable, given the reasonably strong real yields and a slow dribble of positive news from bond rating agencies that should theoretically boost foreign appetite for Indonesian bonds, an important source of support for the currency due to the size of foreign ownership of Indonesian debt. This could merely be a market that feels greater opportunities are available elsewhere — for example in South Africa, where there has been a dramatic recent shift in investor sentiment see chart below.

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Official Sponsor of Usain Bolt. FX and CFD trading involves a high risk of loss. CFDs on Indices Major global indices. We remain cautious, as explained below. Indexing our Global Risk Indicator vs. A couple of things stand out.

First, the global risk indicator can look like a merely coincident indicator, but consider that, for example, it continued to stay low and head lower at times when the EM FX tried to consolidate and stage a rally. Likewise, in other periods, the risk indicator continued to steam higher during a phase when there was a significant hitch in EM currency returns around the US election.

Finally, there have really only been a small few major direction changes in the index and one of those coincided nearly perfectly with the start of this publication in early February, one of the reasons we have maintained a cautious stance on EM exposure. Saxo Bank EM currency outlook: Q1 GDP has been seasonally weak since the global financial crisis and it will take some convincing for the market to believe that the US economy is slowing. On that note, the launch last week of the yuan-denominated oil future in Shanghai could mark a new phase of lowering the status of the US dollar in global trade.

At the other end of the spectrum are the currencies most at risk of US accusations of manipulation, including the South Korean won and Thai baht. It has been replaced by the Mexican peso, which has rallied for virtually all of as each iteration of Trump tariff threats has failed to sustain pressure on the cheaply valued peso, amid talk of carveouts for US policy and a more intense protectionist focus from Trump on China.

Regardless, MXN is still cheap.

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Chart: three- and month carry-adjusted EM FX returns versus USD It is certainly rare to see the HKD sticking out on the month performance category, but it is the weakest currency of the last 12 months in our universe of currencies. No canal do YouTube do Forex Pro pode encontrar os melhores vídeos de Forex em português ou inglês. Aproveite para melhorar os seus conhecimentos sobre este. EM currencies continue to fail to act as a monolithic block of assets subject to day-to-day swings in risk appetite. This is fairly normal in a positive global market environment, but highly unusual given the market volatility and risk aversion evident in global markets over the last couple of months.