HSBC Sage Flags Emerging-Market Pullback on Dollar – Bloomberg 08-07-14

Salient to Investors:

  • David Bloom at HSBC said to sell emerging market currencies, including the Rand, Ruble and Mexican and Colombian Peso, on increasing signs of US growth supporting the US dollar .  Bloom said a mass investor exodus depends on what happens to volatility on long-term US rates moving up – if long rates rise then the resulting full-blown dollar rally will hit emerging markets hard.
  • Phoenix Kalen at Societe Generale expects the rand to weaken and become more volatile over the next 3 months.
  • Koon Chow at Barclays said volatility remains near record lows as investors seek higher yields with US rates in their record-low zero to 0.25 percent range.  Chow said low global market volatility and low yields in many developed fixed-income markets will continue to push capital to emerging markets, while gains in the dollar will help differentiate currencies.
  • Futures indicate the Fed won’t raise its benchmark rate until at least mid-2015.
  • Citigroup downgraded its view on developing currencies.
  • Roland Gabert at DWS Investment  dislikes the rand, Brazilian real, South Korean won and zloty and said discussion of a rate hike in the US is negative for emerging-market currencies.


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Goldman Says Real, Lira, Rand Must Weaken to Close Trade Deficit – Bloomberg 06-21-13

Salient to Investors:

Themistoklis Fiotakis at Goldman Sachs said to curtail widening current account deficits, the Turkish lira, South African rand and Indian rupee would need to depreciate 30 percent on a trade-weighted basis, while the Brazil real and Chile peso need to fall 20 percent.

Fiotakis said the EM bond and FX selloff of the last month is likely to constitute only a small part of a longer trend for EM assets.

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