Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

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.

FX & Rates

We estimate that the USD-value of central bank FX reserves – adjusted for currency-valuation effects – in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand rose by about $342bn (1.5% of GDP) between end-March 2020 and end-February 2021 (see <a href="https://www.smartkarma.com/insights/non-japan-asia-neers-and-fx-intervention" target="_blank" rel="noopener">Non-Japan Asia: NEERs and FX intervention</a>, 26th March 2021). The increase, which ranged from 0.3% of GDP in China to nearly 28% of GDP in Singapore, was partly the result of central banks buying foreign currency in the FX market. At the very least NJA central banks’ FX intervention capped the pace of appreciation (CNY, KRW, IDR, THB and TWD) or contributed to (modest) NEER depreciation (INR, MYR, PHP), in our view.Of course the matrix of exchange rate policy AND balance of payment flows, and their underlying drivers, is key to past and future currency performance.In the past 12 months the MAS has kept the Singapore Dollar NEER within a very narrow range of about 1.2%, effectively neutralising Singapore’s significant current account surplus, to support the critical external sector and ultimately reflate the economy.However, the Singapore Dollar NEER’s recent rally and jump in Singapore CPI-inflation in February arguably complicate the currency’ near-term outlook. Along with consensus, we forecast that the MAS will leave the parameters – (zero) slope, width and central rate – of the Singapore Dollar NEER band unchanged at its forthcoming semi-annual policy meeting. We think the NEER could dip temporarily before rebounding.The People’s Bank of China has allowed large external trade surpluses and capital account inflows into China to push the Chinese Renminbi NEER to a 270-week high.But the Renminbi is showing some signs of altitude sickness. The pace of monthly appreciation has halved recently and the PBoC has fixed USD/CNY higher in 6 of the past 7 sessions. Importantly CPI-inflation remains stuck at the bottom of its five-year ranges.In this context, we think the risk is biased towards the PBoC more actively negating FX inflows into China and towards modest Renminbi NEER downside near-term.

We estimate that the USD-value of central bank FX reserves – adjusted for currency-valuation effects – in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand rose by about $342bn (1.5% of GDP) between end-March 2020 and end-February 2021 (see Non-Japan Asia: NEERs and FX intervention, 26th March 2021). The increase, which ranged from 0.3% of GDP in China to nearly 28% of GDP in Singapore, was partly the result of central banks buying foreign currency in the FX market. At the very least NJA central banks’ FX intervention capped the pace of appreciation (CNY, KRW, IDR, THB and TWD) or contributed to (modest) NEER depreciation (INR, MYR, PHP), in our view.Of course the matrix of exchange rate policy AND balance of payment flows, and their underlying drivers, is key to past and future currency performance.In the past 12 months the MAS has kept the Singapore Dollar NEER within a very narrow range of about 1.2%, effectively neutralising Singapore’s significant current account surplus, to support the critical external sector and ultimately reflate the economy.However, the Singapore Dollar NEER’s recent rally and jump in Singapore CPI-inflation in February arguably complicate the currency’ near-term outlook. Along with consensus, we forecast that the MAS will leave the parameters – (zero) slope, width and central rate – of the Singapore Dollar NEER band unchanged at its forthcoming semi-annual policy meeting. We think the NEER could dip temporarily before rebounding.The People’s Bank of China has allowed large external trade surpluses and capital account inflows into China to push the Chinese Renminbi NEER to a 270-week high.But the Renminbi is showing some signs of altitude sickness. The pace of monthly appreciation has halved recently and the PBoC has fixed USD/CNY higher in 6 of the past 7 sessions. Importantly CPI-inflation remains stuck at the bottom of its five-year ranges.In this context, we think the risk is biased towards the PBoC more actively negating FX inflows into China and towards modest Renminbi NEER downside near-term.

Crunch Time for Singapore Dollar and Renminbi

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

The price of Silver has closed below the 200 day moving average for the first time since May 2020. This development draws some attention. While it is not a break in itself, any lower through $24.05 on a close basis would be meaningful bearish sign.We also review the weekly Gold chart which continues to look concerning as we sustain below the 55 week moving average .As Bonds remain stable and the USD looking increasingly bid across many pairs, it is perhaps no wonder that both Silver and Gold are under pressure.

The price of Silver has closed below the 200 day moving average for the first time since May 2020. This development draws some attention. While it is not a break in itself, any lower through $24.05 on a close basis would be meaningful bearish sign.We also review the weekly Gold chart which continues to look concerning as we sustain below the 55 week moving average .As Bonds remain stable and the USD looking increasingly bid across many pairs, it is perhaps no wonder that both Silver and Gold are under pressure.

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


<ul>
<li>A new currency regime in Asia?</li>
<li>Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM</li>
<li>Rather EM enjoying best forex reserve growth for a decade</li>
<li>
De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization</li>
<li>Loose US fiscal and monetary policies are more likely to spill-over into EM</li>
</ul>


A new currency regime in Asia?
Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM
Rather EM enjoying best forex reserve growth for a decade

De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization
Loose US fiscal and monetary policies are more likely to spill-over into EM


Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

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

The last note sent out on USD-Asia (<a href="https://www.smartkarma.com/insights/is-usd-asia-the-next-market-to-crack" target="_blank" data-smartkarma-citation="insights:48848" rel="noopener">Is USD/Asia the Next Market to Crack?)</a> at the start of this month highlighted the risk of a bounce in the USD. While the USD did start to move, the past couple of weeks have been relatively quiet, at least on the major Asian pairs. However, that looks to change yet again and the central market to watch is USDCNY.

The last note sent out on USD-Asia (Is USD/Asia the Next Market to Crack?) at the start of this month highlighted the risk of a bounce in the USD. While the USD did start to move, the past couple of weeks have been relatively quiet, at least on the major Asian pairs. However, that looks to change yet again and the central market to watch is USDCNY.

China

The Chinese renminbi (yuan) is the official currency of The People's Republic of China. 

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CNY (USDCNY CURNCY)

Crunch Time for Singapore Dollar and Renminbi

We forecast MAS will leave parameters of Singapore Dollar NEER band unchanged at its policy meeting. NEER could dip temporarily before rebounding....

Olivier Desbarres

No Silver Lining, No Golden Egg

Silver and Gold are back under pressure with Bonds stable and the USD looking bid. Any lower on Silver will amount to a bearish break

Shyam Devani

Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

Asian cross-currency volatility is at its all-time low. A de facto Euro-like unit is forming. This could be hugely bullish for Emerging Markets

Michael J. Howell

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

The Pain Trade in Asian FX

The pain trade in Asian FX markets is still USDNCY which is at risk of rallying to the 6.67-6.70 area. This all fits neatly with the fresh...

Shyam Devani

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