The concept of stability in the Chinese currency has been of great interest to investors, especially since the introduction of the People’s Bank of China’s (PBoC) preferred measure of CNY strength, the ‘CFETS index’. As it stands, the official stance of Chinese policymakers is to manage the bilateral exchange rate versus USD such that CNY …read more
This is an executive summary of our white paper on EM Currency Risk Management. Please contact us for a copy. Emerging market (EM) currency exposure is generally expected to deliver positive returns on account of faster productivity gains and higher real interest rates relative to developed markets. However, EM currencies are more volatile than their …read more
Previous EM currency sell-offs of similar magnitudes often yielded high currency returns in subsequent years. Based on valuations, historical data from previous sell-off episodes and the economic rebalancing that is taking place; current exchange rate levels suggest attractive return expectations for long-term TRY (Turkish lira) currency investments. Elevated rates of inflation and the external debt …read more
The Turkish lira came to the forefront of investor attention in August 2018, having at one stage depreciated more than 40% in spot terms against a basket of G4 currencies. This is the largest depreciation seen in our Record EM Currency universe since the sell-off of the Russian rouble in 2014 during the Crimea Crisis. …read more
The case for investing in emerging market currencies remains strong, despite the recent volatility. A combination of rising US rates, concerns about the stability of the global trading system and local political turmoil have generated headwinds for EM currencies. However, the recent sell-off has considerably boosted return expectations given the current level of undervaluation in …read more
• After nearly a decade in decline, the growth gap between emerging markets and developed markets is rising once more, but where is each group in its respective economic cycle?
• Although both groups were synchronised before the crisis, their respective economic cycles have since diverged. G4 economies appear to be well into their cycle, but EMs could be at the beginnings of a new cycle – a positive signal for EM currency investors.
• The Turkish lira was one of the more volatile currencies in 2017.
• High inflation, a central bank apparently hobbled by political resistance to higher rates and persistent political jitters were key factors which made the currency vulnerable.
• In this post we take a closer look at the balance of payments to ascertain whether risks have increased over the last year.
• On 22nd February, Finance minister Gordhan presented his annual budget to the national assembly.
• Gordhan faced a painful trade-off between managing South Africa’s eye-watering debt situation, supporting stagnant private consumption and political sustainability in the most unequal country in the world
• We simulate South Africa’s debt/GDP path under different assumptions, and argue that the economy still has a long way to go to achieve fiscal sustainability
• 11th January saw data on Turkey’s November current account released
• The drop off in the trade balance can be largely explained by FX effects and continued decline in Tourism revenues
• A careful analysis suggests that in the detail might be some much-needed good news for Turkey
How to rank the relative attractiveness of Emerging Market currencies? In this blog post we bring together various metrics that should help investors decide on the perennial question, whether or not to hedge Emerging Market currency risk.