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External broker reports(aggregated public sources)

Scotiabank’s global foreign exchange strategy team provides in-depth regional insights and macro-economic analysis for G10 and advanced economies, Asia Pacific, and Latin America. Find technical and fundamental strategy reports focused on trade ideas, market risks, and the unfolding macro outlook. Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

FX & Rates

<ul><li>The US dollar (USD) has underperformed in the third quarter, reflecting a constellation of factors that have shaken up currency trading and injected renewed volatility into markets.</li><li>We had expected the USD to ease somewhat in H2 as cyclical factors turn less supportive and while USD losses have moderated somewhat in recent trading, the net impact is still a somewhat weaker USD than we had anticipated at this stage.</li><li>USD weakness can be largely explained by the following. Firstly, US yields eased in July and fell sharply in August following the release of a weaker-than-expected US July employment report. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

The US dollar (USD) has underperformed in the third quarter, reflecting a constellation of factors that have shaken up currency trading and injected renewed volatility into markets.We had expected the USD to ease somewhat in H2 as cyclical factors turn less supportive and while USD losses have moderated somewhat in recent trading, the net impact is still a somewhat weaker USD than we had anticipated at this stage.USD weakness can be largely explained by the following. Firstly, US yields eased in July and fell sharply in August following the release of a weaker-than-expected US July employment report. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

<ul>
<li>The Chilean peso has performed well this year but it has still lagged behind its peers and the broad EM currencies on a longer horizon.</li>
<li>The currency has been weighed down by high oil prices, a dovish turn by the central bank, and concerns around the Constitutional Convention and the possibility of new pension withdrawals.</li>
<li>While these concerns are valid, my view is that the currency should outperform, albeit with high volatility, due to its high carry, cheap valuations, and eventually, diminishing political noise.</li>
</ul>


The Chilean peso has performed well this year but it has still lagged behind its peers and the broad EM currencies on a longer horizon.
The currency has been weighed down by high oil prices, a dovish turn by the central bank, and concerns around the Constitutional Convention and the possibility of new pension withdrawals.
While these concerns are valid, my view is that the currency should outperform, albeit with high volatility, due to its high carry, cheap valuations, and eventually, diminishing political noise.


Chilean Peso Is a Buy if One Can Stomach the Volatility

<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

<ul>
<li>The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well despite the dollar strengthening.</li>
<li>The solid EM FX performance is entirely due to Latin American currencies which have performed well due to their very high carry, attractive valuations, and positive political developments.</li>
<li>In the near term, I expect LatAm currencies to continue to perform well but the environment may change as the year progresses.</li>
</ul>


The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well despite the dollar strengthening.
The solid EM FX performance is entirely due to Latin American currencies which have performed well due to their very high carry, attractive valuations, and positive political developments.
In the near term, I expect LatAm currencies to continue to perform well but the environment may change as the year progresses.


<ul>
<li>The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.</li>
<li>Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.</li>
<li>While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.</li>
</ul>


The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.
Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.
While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.


Indonesian Rupiah Shines in Volatile Times

Chile

The Chilean peso is the official currency of the Republic of Chile.  The US dollar is the official currency of the United States of America.

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Monthly FX Outlook – September 2024

The US dollar (USD) has underperformed in the third quarter, reflecting a constellation of factors that have shaken up currency trading and...

Scotiabank

Chilean Peso Is a Buy if One Can Stomach the Volatility

The Chilean peso should outperform in the coming months, albeit with high volatility, due to its high carry, cheap valuations, and eventually,...

Gautam Jain, PhD, CFA

South African Rand’s Outperformance Is Overdone

I see headwinds for the South African rand: the carry is not attractive in real terms or relative to volatility, the current account is set to...

Gautam Jain, PhD, CFA

Latin American Currencies on Top

The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well, led by...

Gautam Jain, PhD, CFA

Indonesian Rupiah Shines in Volatile Times

The Indonesian rupiah has outperformed most other EM currencies but headwinds may be appearing for the currency as the Fed starts raising rates and...

Gautam Jain, PhD, CFA

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