investment insights

EM FX Monthly: Climbing a wall of worry, but climbing nonetheless

EM FX Monthly: Climbing a wall of worry, but climbing nonetheless
Kiran Kowshik - FX Strategy

Kiran Kowshik

FX Strategy
Vasileios Gkionakis, PhD - Global Head of FX Strategy

Vasileios Gkionakis, PhD

Global Head of FX Strategy
Homin Lee - Macro Strategist - Asia

Homin Lee

Macro Strategist - Asia

Key takeaways

  • Over the past month, EM FX has shown a positive, albeit mixed, performance, with Asian FX outperforming but LatAm lagging.
  • Our preferred list of currencies, which includes CNY, MYR, IDR (Asia), MXN, and PEN (in LatAm) as well as RUB (CEEMEA) have performed better than we had forecast. On the other hand, some currencies on which we were already cautious (like BRL) have understandably underperformed.
  • We further upgrade our projections for the CNY, KRW, TWD, MYR, and IDR (Asia) as well as for RUB and CZK (CEEMEA). On the other hand, we tweak MXN higher over H1, but downgrade our BRL and THB forecasts.
  • For the CNY, we revise our year-end forecast of 6.80 down to 6.70. Even if a further reduction in tariffs does not occur before 2020, CNY should perform better as USDCNY fixings converge with a softer USD and activity data stabilises over Q1.
  • The Wuhan coronavirus epidemic has emerged as a potential wildcard. We will continue to assess the extent of the epidemic and its impact on our scenarios and forecasts.

 

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It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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