The importance of responsible investing has been growing rapidly, but currency’s unique role has so far gone largely unnoticed. As Record announces that it is seeding an innovative ESG currency strategy, we ask: how exactly does currency fit into the existing ESG investment landscape? We argue that ESG currency investing can be used to incentivise …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 6th April, the Czech National Bank (CNB) announced an end to their currency floor
The market reaction was muted by comparison to that in the response to the collapse of the EURCHF floor in 2015
We analyse the differences in economic fundamentals and central bank policy which allowed this much smoother exit from a currency floor.
• 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
• Strategies for earning sustainable return in currency are more nuanced than in equities or bonds due to the absence of a “long-only” beta
• We argue that there are, however, strategies to target sustainable returns in the currency space
• This blog post describes growth, carry, momentum and value as potential sources of return in currency
• 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
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