Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>I explore the 2021 winners and losers among EM currencies, leading into the discussion on which of these performances were appropriate and which currencies may offer opportunities this year.</li>
<li>The currencies to track this year for opportunities to buy are Chilean peso and Peruvian sol, and to sell are Colombian peso and South African rand. </li>
<li>Among currencies that already look appealing to buy are the Indian rupee and the Thai baht, while the Chinese yuan and the Czech koruna appear expensive.</li>
</ul>


I explore the 2021 winners and losers among EM currencies, leading into the discussion on which of these performances were appropriate and which currencies may offer opportunities this year.
The currencies to track this year for opportunities to buy are Chilean peso and Peruvian sol, and to sell are Colombian peso and South African rand. 
Among currencies that already look appealing to buy are the Indian rupee and the Thai baht, while the Chinese yuan and the Czech koruna appear expensive.


Not All Winners Are Equal: 2021 EM FX Outliers and Implications for 2022

<ul>
<li>The Chilean peso (CLP) has begun to recover after being one of the worst-performing EM currencies over the past 6 months.</li>
<li>I expect CLP to continue to outperform as the central bank is likely to stay aggressive with inflation expectations continuing to rise. Moreover, the presidential election polls have turned market-friendly.</li>
<li>I will be looking for an opportunity to exit from my recommendation to buy CLP against the South African rand, which has worked well.</li>
</ul>


The Chilean peso (CLP) has begun to recover after being one of the worst-performing EM currencies over the past 6 months.
I expect CLP to continue to outperform as the central bank is likely to stay aggressive with inflation expectations continuing to rise. Moreover, the presidential election polls have turned market-friendly.
I will be looking for an opportunity to exit from my recommendation to buy CLP against the South African rand, which has worked well.


Chilean Peso’s Recovery to Continue but With High Volatility

A month ago, I recommended hedging broad EM currency exposure with the euro. In this note, I first evaluate how well the hedge worked and then address the question of whether to continue to hold the hedge or not. I demonstrate that the hedge has been very effective based on the hedged returns and I also recommend continuing to hold on to the hedge as risks remain on the horizon.Separately, the attached file is a snapshot of the EM currency market in which I 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.

A month ago, I recommended hedging broad EM currency exposure with the euro. In this note, I first evaluate how well the hedge worked and then address the question of whether to continue to hold the hedge or not. I demonstrate that the hedge has been very effective based on the hedged returns and I also recommend continuing to hold on to the hedge as risks remain on the horizon.Separately, the attached file is a snapshot of the EM currency market in which I 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.

How Effective Has the Euro Hedge Been for EM FX?

After strengthening through early October, the US dollar has turned trendless. I evaluate the change in performance of EM currencies when the dollar was at a peak versus now. Specifically, I go over the regional and country divergences to identify the outperformers and underperformers. I also highlight the currencies where I see the most value.Separately, the attached file is a snapshot of the EM currency market in which I 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.

After strengthening through early October, the US dollar has turned trendless. I evaluate the change in performance of EM currencies when the dollar was at a peak versus now. Specifically, I go over the regional and country divergences to identify the outperformers and underperformers. I also highlight the currencies where I see the most value.Separately, the attached file is a snapshot of the EM currency market in which I 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: Updating EM FX Winners and Losers

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

Russia

The Russian ruble is the official currency of The Russian Federation. 

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Not All Winners Are Equal: 2021 EM FX Outliers and Implications for 2022

I explore the 2021 winners and losers among EM currencies, leading into the discussion on which of these performances were appropriate and which...

Gautam Jain, PhD, CFA

Chilean Peso’s Recovery to Continue but With High Volatility

I would be looking for an opportunity to exit from my recommendation to buy Chilean peso vs South African rand as I expect the currency to continue...

Gautam Jain, PhD, CFA

How Effective Has the Euro Hedge Been for EM FX?

In this note, I first evaluate how well has the euro hedge for EM FX that I recommended a month ago worked and then address the question of whether...

Gautam Jain, PhD, CFA

FX Dashboard: Updating EM FX Winners and Losers

As the US dollar turns trendless, I go over the regional and country divergences to identify the outperformers and underperformers in EM. I also...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

Despite high inflation, Russia should raise the policy rate by less than consensus due to new restrictions as Covid cases have risen sharply. This...

Gautam Jain, PhD, CFA

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52-week Range

Market Cap (USDm)

P/E

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