Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

We compare the beta-adjusted performances of EM currencies to identify leaders and laggards in the latest bout of dollar appreciation.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.

We compare the beta-adjusted performances of EM currencies to identify leaders and laggards in the latest bout of dollar appreciation.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.

FX Dashboard: Leaders and Laggards in EM in the Dollar’s Latest Appreciation Bout

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Olivier Desbarres

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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.

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

In this note, we discuss the most recent episode of turmoil in Turkey's markets and our near-term trading strategy for its assets.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.

In this note, we discuss the most recent episode of turmoil in Turkey's markets and our near-term trading strategy for its assets.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.

FX Dashboard: Turkey's Assets Descend into Familiar Turmoil

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the central bank, taking the real rate to a high positive level.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.

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the central bank, taking the real rate to a high positive level.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.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

DXY rally call from sub 90 to 92 is in line and we are a tactical seller in the 92+ area for a pullback sequence amid an expected 10yr yield pullback. With the USD such a crowded short trade in a rising yield trajectory, we now find compelling evidence that the dollar may shift gears toward a more bullish stance after a pullback sequence. DXY weekly bull divergence and a price bottom pattern mirroring that in 2018 has our attention.The USD is a crowded short and would take little to spark a short covering reaction higher as witnessed in the USD/JPY above 107 (impulsive rise has legs). NZD above 0.74 shows risk of a macro top as does the AUD back near 0.81.

DXY rally call from sub 90 to 92 is in line and we are a tactical seller in the 92+ area for a pullback sequence amid an expected 10yr yield pullback. With the USD such a crowded short trade in a rising yield trajectory, we now find compelling evidence that the dollar may shift gears toward a more bullish stance after a pullback sequence. DXY weekly bull divergence and a price bottom pattern mirroring that in 2018 has our attention.The USD is a crowded short and would take little to spark a short covering reaction higher as witnessed in the USD/JPY above 107 (impulsive rise has legs). NZD above 0.74 shows risk of a macro top as does the AUD back near 0.81.

A Dollar Macro Low Would Surprise Crowded Shorts

Thailand

The Thai baht is the official currency of Thailand. 

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THB (USDTHB CURNCY)

FX Dashboard: Leaders and Laggards in EM in the Dollar’s Latest Appreciation Bout

We compare the beta-adjusted performances of EM currencies to identify leaders and laggards in the latest bout of dollar appreciation.

Gautam Jain, PhD, CFA

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

FX Dashboard: Turkey's Assets Descend into Familiar Turmoil

In this note, we discuss the most recent episode of turmoil in Turkey's markets and our near-term trading strategy for its assets.

Gautam Jain, PhD, CFA

FX Dashboard: Lira Re-Engages with EM

In the near-term, we see room for the Turkish lira to appreciate as it catches up with its EM peers following the aggressive rate hike by the...

Gautam Jain, PhD, CFA

A Dollar Macro Low Would Surprise Crowded Shorts

USD is a crowded short trade in a rising yield trajectory, we now find compelling evidence that the dollar will shift gears (more bullish) after a...

Thomas Schroeder

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)