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Risk On Environment Supports ZAR, HUF and MXN

EM FX
  • The USD has been constantly reaching new lows in the past two weeks following Powell's 'dovish' speech at Jackson Hole in addition to the 'big NFP miss' on Friday.
  • While net specs on the Dollar continue to reach new highs (highest level since October 2019), a rising number of investors are speculating that the Fed may need to delay its tapering due to the sharp deceleration in the economic activity (globally).
  • Since the start of the month, the risk on environment has been strongly favorable for the ZAR, also known as the EM carry currency, which is up nearly 2% against the USD.
  • The HUF also continues to perform strongly amid hawkish NBH; strong forint has been supporting Hungarian equities with the BUX index trading at a record high above the 52,000 level.
  • On the other hand, BRL, THB and COP have been the weakest performers this month, down 0.8% against the USD this month.
  • Broad USD weakness also continues to support EM equities; EEM is up nearly 8% since Aug 20 and is currently testing key resistance at 53.40 (100D and 200D SMA).

Source: Bloomberg/MNI

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