Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

The RRR cut by PBOC last week has thrown the market into confusion. Our view is that this is not the beginning of an aggressive easing cycle, rather a preemptive move to ensure that the economic recovery stays in place. However, the move has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the renminbi and, in turn, for EM FX.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

The RRR cut by PBOC last week has thrown the market into confusion. Our view is that this is not the beginning of an aggressive easing cycle, rather a preemptive move to ensure that the economic recovery stays in place. However, the move has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the renminbi and, in turn, for EM FX.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

FX Dashboard: Spillover Risk from China to EM FX

In this week’s Alpha Bites, we recommend buying the Malaysian ringgit (MYR) against the Chinese renminbi (CNY) in a beta-neutral ratio. PBOC’s surprise RRR cut indicates concerns about the economy losing momentum as evidenced by recent data and should thus prevent strong fixings for the currency. The ringgit, meanwhile, has underperformed due to rising coronavirus cases and political uncertainty. However, the rapid vaccination pace, higher oil prices, and a new fiscal stimulus package should counter the headwinds to growth in Malaysia in our view.

In this week’s Alpha Bites, we recommend buying the Malaysian ringgit (MYR) against the Chinese renminbi (CNY) in a beta-neutral ratio. PBOC’s surprise RRR cut indicates concerns about the economy losing momentum as evidenced by recent data and should thus prevent strong fixings for the currency. The ringgit, meanwhile, has underperformed due to rising coronavirus cases and political uncertainty. However, the rapid vaccination pace, higher oil prices, and a new fiscal stimulus package should counter the headwinds to growth in Malaysia in our view.

Alpha Bites: Long Malaysian Ringgit Vs Short Chinese Renminbi

While our base case is not one of significant dollar strengthening, we need to be cognizant of the risk. As such, we evaluate which currencies are the most vulnerable if we get a repeat of the Q1 dollar appreciation and EM FX sell-off on the back of higher US Treasury yields.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

While our base case is not one of significant dollar strengthening, we need to be cognizant of the risk. As such, we evaluate which currencies are the most vulnerable if we get a repeat of the Q1 dollar appreciation and EM FX sell-off on the back of higher US Treasury yields.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

FX Dashboard: Which Currencies Are Most Vulnerable to Dollar Strengthening?

The Mexican peso rallied following the midterm election on Sunday, while the Peruvian sol sold off following the presidential runoff. While the elections reaffirmed our bullish view for the Mexican peso, despite our constructive view on the Peruvian sol we stay on the sidelines given the recount-related uncertainty ahead.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

The Mexican peso rallied following the midterm election on Sunday, while the Peruvian sol sold off following the presidential runoff. While the elections reaffirmed our bullish view for the Mexican peso, despite our constructive view on the Peruvian sol we stay on the sidelines given the recount-related uncertainty ahead.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

FX Dashboard: Opposite Reactions of Mexican Peso and Peruvian Sol to Sunday’s Elections

In this note, we go over the rationale behind the recent outperformance of the Hungarian forint and make the case that the currency can continue to appreciate in the near term.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

In this note, we go over the rationale behind the recent outperformance of the Hungarian forint and make the case that the currency can continue to appreciate in the near term.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

FX Dashboard: Hungary’s Outperformance Is Playing Catch-Up

Malaysia

The Malaysian ringgit is the official currency of the Federation of Malaysia. 

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MYR (USDMYR CURNCY)

FX Dashboard: Spillover Risk from China to EM FX

The RRR cut by PBOC last week has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the...

Gautam Jain, PhD, CFA

Alpha Bites: Long Malaysian Ringgit Vs Short Chinese Renminbi

We recommend Long Malaysian ringgit/Short Chinese yuan as we expect yuan to underperform following the shift to an easing stance by PBOC while...

Gautam Jain, PhD, CFA

FX Dashboard: Which Currencies Are Most Vulnerable to Dollar Strengthening?

We evaluate which currencies are the most vulnerable under the risk scenario of a repeat of the Q1 dollar appreciation and EM FX sell-off on the...

Gautam Jain, PhD, CFA

FX Dashboard: Opposite Reactions of Mexican Peso and Peruvian Sol to Sunday’s Elections

The Sunday elections in Mexico reaffirmed our bullish view for the peso, but in the case of Peru, despite our constructive view on the sol we stay...

Gautam Jain, PhD, CFA

FX Dashboard: Hungary’s Outperformance Is Playing Catch-Up

In this note, we go over the rationale behind the recent outperformance of the Hungarian forint and make the case that the currency can continue to...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)