18 Feb 2015
EM FX: Reduce aggregate USD risk and focus on EM crosses – JPM
FXStreet (Barcelona) - FX Strategists at JP Morgan, suggest the trade setup for EM FX, expecting EM crosses to offer better risk/reward for the time being.
Key Quotes
“Swings in oil, a broad dollar that is overshot near-term, and risks stemming from Europe suggest better risk/reward in EM crosses for the time being.”
“We favored shorts in EM Asia are SGD/INR, MYR/KRW, and SGD/CNY.”
“In Latin America, we take profits on UW PEN and long CLP/PEN given the central bank has moved to a more neutral stance, and the currency depreciation seen YTD is close to our target level.”
“We add long CLP/COP to maintain the bullish CLP view via a currency which looks rich on our short-term valuation models.”
“In EMEA EM, we maintain a small UW in RON which would benefit from another risk-off move due to disappointments stemming from Greece or Russia/Ukraine developments and which serves as a partial hedge to bullish duration positions in the GBI-EM Model portfolio.”
“Add a tactical long in TRY versus a basket given lower odds of additional easing near term.”
Key Quotes
“Swings in oil, a broad dollar that is overshot near-term, and risks stemming from Europe suggest better risk/reward in EM crosses for the time being.”
“We favored shorts in EM Asia are SGD/INR, MYR/KRW, and SGD/CNY.”
“In Latin America, we take profits on UW PEN and long CLP/PEN given the central bank has moved to a more neutral stance, and the currency depreciation seen YTD is close to our target level.”
“We add long CLP/COP to maintain the bullish CLP view via a currency which looks rich on our short-term valuation models.”
“In EMEA EM, we maintain a small UW in RON which would benefit from another risk-off move due to disappointments stemming from Greece or Russia/Ukraine developments and which serves as a partial hedge to bullish duration positions in the GBI-EM Model portfolio.”
“Add a tactical long in TRY versus a basket given lower odds of additional easing near term.”