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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EM FX
- The chart below shows the performance of EM FX currencies relative to the Japanese Yen since the beginning of April 2020.
- We can notice that the large liquidity injections from major central banks to prevent the world from falling into a deflationary depression have generated a strong risk-on environment, which has initiated a positive momentum for risky assets such as equities but also a significant appreciation of EM currencies against the traditional risk off currency: JPY.
- The winner has been the South African Rand (ZAR), up nearly 30% against JPY in the past 14 months, followed by CZK, MXN and CLP all up 20%.
- The biggest loser has been the TRY amid surging political and economic uncertainty and the rise in 'staff turnover' in March 2021; TRYJPY has fallen by 20% since April 2020.
- The Brazilian Real has also remained weak in the past year, which 'pushed' the CBB to start a tightening cycle in order to curb inflationary pressures; CBB has already increased the Selic rate by 150bps this year to 3.50% (Economists expect the Selic rate to reach 5.5% by the end of the year).
- Can the currency strength in some EM countries become a problem for the economic recovery, or will it just offset the rise in inflationary pressures and let central banks keep interest rates at historical lows for longer?
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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