Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this note, we compare and contrast the correction in EM currencies in the current reflationary scare with a similar episode in 2013.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we compare and contrast the correction in EM currencies in the current reflationary scare with a similar episode in 2013.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Taper Tantrum Vs Current Reflationary Scare – Part 1

This is the first edition of our trade ideas recap note, which we plan to release monthly to provide a list of outstanding trade recommendations along with any updates on them. We will discuss the performance of trade recommendations and whether any need to be closed.

This is the first edition of our trade ideas recap note, which we plan to release monthly to provide a list of outstanding trade recommendations along with any updates on them. We will discuss the performance of trade recommendations and whether any need to be closed.

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.

In the past nine weeks major currencies and global equity markets have traded broadly in line with our expectations. The US Dollar has traded in a very narrow range, confounding consistently bearish market expectations. Similarly, most emerging Asian currencies have barely moved, pointing to the ability and willingness of Asian central bank to intervene in FX markets in a bid to manage both the volatility and directionality of their currencies. Conversely, emerging currencies, particularly in Latin America, have been prone to sharp pull-backs.Stretched currency valuations and still very weak global economic growth in January – which tallies with our forecast – has likely been a driver of currencies’ performance. In the past five weeks the inverse correlation between the Dollar and S&amp;P 500 and between the Dollar and the steepness of the US Treasury yield curve has broken down.Our take is that the broad-based diversification out of Dollars, driven by buoyant global risk appetite and market concerns about the Dollar’s real carry, has stalled and slightly reversed. We suspect that central banks and sovereign wealth funds may have re-focussed on domestic factors, which has in turn led to a rotation between other reserve currencies. This includes a rotation out of Euros and move into Sterling and a rotation out of the safe haven Swiss Franc and in particular Japanese Yen into commodity reserve currencies – namely the Canadian and Australian Dollars and Norwegian Krone – and New Zealand Dollar. These four currencies’ NEERs are now near the top end of their three-month ranges. In each case specific drivers have been in play, “in our view. Our analysis suggests that the Norwegian Krone may still be “cheap” relative to the current price of Brent crude oil.Figure 8 suggests that a rotation in and out of other (EM) currencies which were 1-2 months ago trading at the extremes of their ranges may have also taken place.The Dollar NEER has weakened about 0.9% since 4th February and its inverse correlation with the S&amp;P 500 (+1.2%) has re-established itself. We think this is a short-term correction, with another prolonged Dollar downtrend still a couple of months away.

In the past nine weeks major currencies and global equity markets have traded broadly in line with our expectations. The US Dollar has traded in a very narrow range, confounding consistently bearish market expectations. Similarly, most emerging Asian currencies have barely moved, pointing to the ability and willingness of Asian central bank to intervene in FX markets in a bid to manage both the volatility and directionality of their currencies. Conversely, emerging currencies, particularly in Latin America, have been prone to sharp pull-backs.Stretched currency valuations and still very weak global economic growth in January – which tallies with our forecast – has likely been a driver of currencies’ performance. In the past five weeks the inverse correlation between the Dollar and S&amp;P 500 and between the Dollar and the steepness of the US Treasury yield curve has broken down.Our take is that the broad-based diversification out of Dollars, driven by buoyant global risk appetite and market concerns about the Dollar’s real carry, has stalled and slightly reversed. We suspect that central banks and sovereign wealth funds may have re-focussed on domestic factors, which has in turn led to a rotation between other reserve currencies. This includes a rotation out of Euros and move into Sterling and a rotation out of the safe haven Swiss Franc and in particular Japanese Yen into commodity reserve currencies – namely the Canadian and Australian Dollars and Norwegian Krone – and New Zealand Dollar. These four currencies’ NEERs are now near the top end of their three-month ranges. In each case specific drivers have been in play, “in our view. Our analysis suggests that the Norwegian Krone may still be “cheap” relative to the current price of Brent crude oil.Figure 8 suggests that a rotation in and out of other (EM) currencies which were 1-2 months ago trading at the extremes of their ranges may have also taken place.The Dollar NEER has weakened about 0.9% since 4th February and its inverse correlation with the S&amp;P 500 (+1.2%) has re-established itself. We think this is a short-term correction, with another prolonged Dollar downtrend still a couple of months away.

Dollar’s Recent Weakness – Blip, Not New Trend

In this week’s “Alpha Bites”, we recommend going long the South Korean won (KRW) against shorting the Taiwan dollar (TWD) in a risk-neutral ratio, with the won underperforming particularly since the start of the year.

In this week’s “Alpha Bites”, we recommend going long the South Korean won (KRW) against shorting the Taiwan dollar (TWD) in a risk-neutral ratio, with the won underperforming particularly since the start of the year.

Alpha Bites: Long Korean Won (KRW) Vs Short Taiwan Dollar (TWD)

In this note, we go over the factors driving the lira's performance and our view on the currency. The attached file is a snapshot of the 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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we go over the factors driving the lira's performance and our view on the currency. The attached file is a snapshot of the 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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Explaining Lira's Outperformance

South Korea

The South Korean won is the official currency of The Republic of Korea (South Korea). 

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KRW (USDKRW CURNCY)

FX Dashboard: Taper Tantrum Vs Current Reflationary Scare – Part 1

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we compare the correction this year in EM...

Gautam Jain, PhD, CFA

Alpha Bites: Monthly Trade Ideas Recap

This is the first edition of our trade ideas recap note, which we plan to release monthly to provide a list of outstanding trade recommendations...

Gautam Jain, PhD, CFA

Dollar’s Recent Weakness – Blip, Not New Trend

In past 2 months range-bound USD and Asian currencies, pull-back prone EM currencies and buoyant equities have performed in line with our forecast....

Olivier Desbarres

Alpha Bites: Long Korean Won (KRW) Vs Short Taiwan Dollar (TWD)

With the Taiwan dollar (TWD) outperforming the South Korean won (KRW), especially since the start of the year, we recommend going long KRW against...

Gautam Jain, PhD, CFA

FX Dashboard: Explaining Lira's Outperformance

Attached is our daily FX Dashboard that highlights dislocations in EM currency markets. In this note, we go over the factors driving the lira's...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)