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Credit Agricole See High Beta Currencies Underperforming Across August

EMERGING MARKETS
  • Credit Agricole write that they expect ongoing tightening of global liquidity, combined with diminished liquidity, will spur a repricing of risk assets including high beta emerging markets currencies.
  • They see the tightening of financial conditions stemming from higher-for-longer FFR, shrinking Fed balance sheet, cyclical credit crunch and increased US bond issuance. The recent BoJ YCC tweak could also provide headwinds to foreign sovereign bonds and particularly Latin America.
  • On Latam specifically, they see positioning in FX as having become stretched, with valuations having started to screen as expensive.
  • As such, they expect high beta FX to underperform low beta currencies from here as a result.
EM BulletHomepagemarkets-real-timeBulletEmerging Market News
EM BulletHomepagemarkets-real-timeBulletEmerging Market News

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