Goldman Sachs: More Room To Run For High-Yielding EM FX

Goldman Sachs have noted that "as investor concerns around 'taper talk' have faded and sent core yields lower, EM high-yielders have continued their strong run. While nominal levels in some crosses are less compelling as a result, and while data prints (such as tomorrow's U.S. CPI) carry tactical risks, over the medium run, we think (i) deep value in selected crosses, (ii) an ongoing carry rebuild, and (iii) a vaccine-led cyclical reopening can support EM HY FX."

• "We refresh our framework for identifying opportunities among the EM high-yielders. The clear standouts are RUB and BRL, which combine their typical high sensitivity to risk sentiment and commodity prices with deep value signals and top-shelf yield as hiking cycles have continued. We recommend going long an equal-weighted basket of RUB and BRL vs USD, with an entry level of 100, a target of 108, and a stop of 96. COP also features deep value and high beta, but lower carry means the bar for longs is higher. While we continue to like both MXN and ZAR, and they arguably feature less idiosyncratic risks, more modest value now compared with RUB and BRL suggests engaging via other local assets (including SAGBs and Mexican banks)."