Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Chilean peso has performed well this year but it has still lagged behind its peers and the broad EM currencies on a longer horizon.</li>
<li>The currency has been weighed down by high oil prices, a dovish turn by the central bank, and concerns around the Constitutional Convention and the possibility of new pension withdrawals.</li>
<li>While these concerns are valid, my view is that the currency should outperform, albeit with high volatility, due to its high carry, cheap valuations, and eventually, diminishing political noise.</li>
</ul>


The Chilean peso has performed well this year but it has still lagged behind its peers and the broad EM currencies on a longer horizon.
The currency has been weighed down by high oil prices, a dovish turn by the central bank, and concerns around the Constitutional Convention and the possibility of new pension withdrawals.
While these concerns are valid, my view is that the currency should outperform, albeit with high volatility, due to its high carry, cheap valuations, and eventually, diminishing political noise.


Chilean Peso Is a Buy if One Can Stomach the Volatility

<ul>
<li>Given the current uncertainties stemming from the Fed monetary tightening and Russia's invasion, trading opportunities are creeping up as short-term mispricing tend to occur in such environments.</li>
<li>One such opportunity could be the South African rand, which has outperformed on a year-to-date basis relative to other emerging market currencies.</li>
<li>I see headwinds for the rand: the carry is low in real terms and versus volatility, the current account is set to deteriorate, growth remains a concern and it's expensive.</li>
</ul>


Given the current uncertainties stemming from the Fed monetary tightening and Russia's invasion, trading opportunities are creeping up as short-term mispricing tend to occur in such environments.
One such opportunity could be the South African rand, which has outperformed on a year-to-date basis relative to other emerging market currencies.
I see headwinds for the rand: the carry is low in real terms and versus volatility, the current account is set to deteriorate, growth remains a concern and it's expensive.


South African Rand’s Outperformance Is Overdone

<ul>
<li>The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well despite the dollar strengthening.</li>
<li>The solid EM FX performance is entirely due to Latin American currencies which have performed well due to their very high carry, attractive valuations, and positive political developments.</li>
<li>In the near term, I expect LatAm currencies to continue to perform well but the environment may change as the year progresses.</li>
</ul>


The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well despite the dollar strengthening.
The solid EM FX performance is entirely due to Latin American currencies which have performed well due to their very high carry, attractive valuations, and positive political developments.
In the near term, I expect LatAm currencies to continue to perform well but the environment may change as the year progresses.


<ul>
<li>The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.</li>
<li>Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.</li>
<li>While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.</li>
</ul>


The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.
Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.
While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.


Indonesian Rupiah Shines in Volatile Times

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Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

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Technical Analysis

<ul>
<li>USD/TWD represents the ultimate laggard USD long play in Asia given outflows from Taiwanese equities and a bullish technical backdrop/breakout.</li>
<li>USD/TWD 28.60 is the level to clear for bull traction to the 29.00 barrier with 29.50 targeted once through a rather difficult 29.00 level.</li>
<li>TAIEX trendline resistance is the ideal short level into any bounce with 16,200-000 the support target.</li>
</ul>


USD/TWD represents the ultimate laggard USD long play in Asia given outflows from Taiwanese equities and a bullish technical backdrop/breakout.
USD/TWD 28.60 is the level to clear for bull traction to the 29.00 barrier with 29.50 targeted once through a rather difficult 29.00 level.
TAIEX trendline resistance is the ideal short level into any bounce with 16,200-000 the support target.


USD/TWD Top Laggard Play with Taiwan Equities at Risk

Taiwan

The New Taiwan dollar is the official currency of Taiwan

Price Gauge
52-week Range	0.00 - 0.00
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TWD (USDTWD CURNCY)

Chilean Peso Is a Buy if One Can Stomach the Volatility

The Chilean peso should outperform in the coming months, albeit with high volatility, due to its high carry, cheap valuations, and eventually,...

Gautam Jain, PhD, CFA

South African Rand’s Outperformance Is Overdone

I see headwinds for the South African rand: the carry is not attractive in real terms or relative to volatility, the current account is set to...

Gautam Jain, PhD, CFA

Latin American Currencies on Top

The US dollar has strengthened this year in line with my expectation, but the surprise has been that EM currencies have performed well, led by...

Gautam Jain, PhD, CFA

Indonesian Rupiah Shines in Volatile Times

The Indonesian rupiah has outperformed most other EM currencies but headwinds may be appearing for the currency as the Fed starts raising rates and...

Gautam Jain, PhD, CFA

USD/TWD Top Laggard Play with Taiwan Equities at Risk

USD/TWD represents the ultimate laggard USD long play in Asia given outflows from Taiwanese equities and a bullish technical backdrop/breakout.

Thomas Schroeder

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)