Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Russian ruble has been the worst-performing currency in EM over the past month leading to the question: Is the currency cheap based on the risk premium priced in it?</li>
<li>Comparing the current episode with the 2014 annexation of Crimea by Russia, we conclude that the market is pricing in a 10% probability of an invasion followed by crippling sanctions.</li>
<li>With the currency not particularly cheap and given the asymmetric risk-reward, I would opt to not have any exposure to it for the time being.</li>
</ul>


The Russian ruble has been the worst-performing currency in EM over the past month leading to the question: Is the currency cheap based on the risk premium priced in it?
Comparing the current episode with the 2014 annexation of Crimea by Russia, we conclude that the market is pricing in a 10% probability of an invasion followed by crippling sanctions.
With the currency not particularly cheap and given the asymmetric risk-reward, I would opt to not have any exposure to it for the time being.


Is the Risk Premium High Enough in the Russian Ruble?

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Provide Comprehensive Analysis & Commentary

SAV Markets

SAV Markets aims to provide comprehensive analysis & commentary on foreign exchange and asset markets. The approach is multi asset as markets are typically interlinked. Cause and effect are always at work, even if those effects take time to manifest. As nothing is permanent we strive to get ahead of the curve in an ever changing world.

Technical Analysis

<ul>
<li>Numerous New Year developments suggest markets are heading towards a world where the worst of the Covid might be behind us and a better growth trajectory awaits</li>
<li>Yields have moved higher, airlines &amp; transport have performed well, Oil is up, and some Asian markets have started to rebound or breakout – Australia, Vietnam &amp; India as examples</li>
<li>This brings Thailand in focus as one of the major tourist destinations. The charts below show the breakouts and potential trends at work</li>
</ul>


Numerous New Year developments suggest markets are heading towards a world where the worst of the Covid might be behind us and a better growth trajectory awaits
Yields have moved higher, airlines &amp; transport have performed well, Oil is up, and some Asian markets have started to rebound or breakout – Australia, Vietnam &amp; India as examples
This brings Thailand in focus as one of the major tourist destinations. The charts below show the breakouts and potential trends at work


<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>Chile's political polarization was apparent in Sunday's general elections where the two leading candidates for the presidency who are headed for a run-off election are leftist and ultra-conservative. </li>
<li>The markets reacted positively to the elections in which right-wing parties performed well, which allowed me to recommend taking profits on a long Chilean peso vs South African rand trade.</li>
<li>While there is room for the peso to continue to outperform, I recommend closing the trade for now as I anticipate market volatility to pick up again.</li>
</ul>


Chile's political polarization was apparent in Sunday's general elections where the two leading candidates for the presidency who are headed for a run-off election are leftist and ultra-conservative. 
The markets reacted positively to the elections in which right-wing parties performed well, which allowed me to recommend taking profits on a long Chilean peso vs South African rand trade.
While there is room for the peso to continue to outperform, I recommend closing the trade for now as I anticipate market volatility to pick up again.


Chile’s Market-Friendly Election Outcome Allows Exit from Trade Recommendation

<ul>
<li>The Hungarian central bank increased the size of the rate hike from the previous meeting, but it failed to provide much support to the currency.</li>
<li>I expect the forint to lag in the near term unless the central bank turns more aggressive because real rates remain negative and the carry of the currency is low.</li>
<li>Complicating the task of the central bank are the upcoming election in 2022, which has led to the prime minister ramping up pre-election spending, adding to inflationary pressures.</li>
</ul>


The Hungarian central bank increased the size of the rate hike from the previous meeting, but it failed to provide much support to the currency.
I expect the forint to lag in the near term unless the central bank turns more aggressive because real rates remain negative and the carry of the currency is low.
Complicating the task of the central bank are the upcoming election in 2022, which has led to the prime minister ramping up pre-election spending, adding to inflationary pressures.


Forint to Lag Even as the Hungarian Central Bank Raises the Pace of Rate Hikes

Thailand

The Thai baht is the official currency of Thailand. 

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Is the Risk Premium High Enough in the Russian Ruble?

Despite the recent underperformance of the Russian ruble, the currency is not particularly cheap. Given the asymmetric risk-reward profile, I would...

Gautam Jain, PhD, CFA

Thailand – Another Asian Break

The Thai stock market shows a breakout while the currency is starting the year on a positive footing. Gains of some 9%-10% could be on the horizon...

Shyam Devani

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

Chile’s Market-Friendly Election Outcome Allows Exit from Trade Recommendation

The markets reacted positively to Chile's elections in which right-wing parties performed well, which allowed me to recommend taking profits on a...

Gautam Jain, PhD, CFA

Forint to Lag Even as the Hungarian Central Bank Raises the Pace of Rate Hikes

I expect the forint to lag in the near term unless the central bank turns more aggressive because real rates remain negative, the carry of the...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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