BRL, CNH and JPY seen as debt ceiling event risk hedges – TDS

Economists at TD Securities like BRL, CNH, and JPY as debt ceiling event risk hedges.

BRL provides a carry cushion

“Barring a red-hot CPI report this week, we think the rising US risks will probably reinforce a broad-based pullback in the USD.”

“For hedging the debt ceiling event risk, we like BRL, CNH, and JPY, where the first two provide the right beta to equities. While BRL provides a carry cushion, it is a bit more overvalued in some of our short-term models than CNH. The upside for CNH is likely viewed as reserve diversification hedge to the USD, especially if policymakers take the negotiations down to the wire.”