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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
- Since the start of the year, the Russia/Ukraine conflict generated a sharp divergence between Latam and CEEMEA currencies.
- While CEEMEA FX have been the worst performing currencies this year among the EM world (strongly impacted by the war shock), Latam FX have been gradually converging back towards their 'fundamental' value, mainly supported by the elevated nominal yields and aggressive tightening.
- In the chart below, we compute the performance of the Latam FX basket relative to the CEEMEA one (excluding South Africa and Russia).
- South Africa has been the ‘outlier’ in the CEEMEA region as domestic asset prices have not been impacted by the war shock (SA is less reliant on Russia).
- We also reduce the weight on TRY to lower the sharp increase in volatility that the Lira experienced in Q4 2021.
- The Latam/CEEMEA FX basket experienced a significant surge since the start of the year, soaring from 0.9150 to 1.1870.
- Hence, this shows show significantly undervalued the CEEMEA currencies (particularly HUF), where central banks have also run aggressive tightening to tame inflation.
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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