26 Mar 2015
Asia FX trade recommendation into USD consolidation – BAML
FXStreet (Barcelona) - The BofA-Merrill Lynch Team, maintains a neutral outlook on most EM currencies, and recommends a short basket of KRW, TWD and SGD versus USD.
Key Quotes
“USD consolidation could continue in the near term; however, volatility will likely remain high and medium-term dollar appreciation is our base case scenario.”
“Therefore, we largely remain neutral on EM currencies and our one-month-ahead Compass30 FX model echoes this view. Compass30 signals neutral positions in 15 of the 20 currencies it covers. However, the model still finds some room for appreciation in BRL, KRW, TRY, ZAR and RUB since these currencies may have overshot their short-term equilibriums.”
“In Asia, we maintain our shorts against USD despite the recent consolidation. We continue to recommend a short basket of KRW, TWD and SGD versus the USD.”
“Competitive devaluation risks could resurface, especially with these currencies experiencing short-term appreciation pressure in the aftermath of the FOMC.”
“We also recommend 6m USD/MYR call spreads due to the low energy price environment.”
Key Quotes
“USD consolidation could continue in the near term; however, volatility will likely remain high and medium-term dollar appreciation is our base case scenario.”
“Therefore, we largely remain neutral on EM currencies and our one-month-ahead Compass30 FX model echoes this view. Compass30 signals neutral positions in 15 of the 20 currencies it covers. However, the model still finds some room for appreciation in BRL, KRW, TRY, ZAR and RUB since these currencies may have overshot their short-term equilibriums.”
“In Asia, we maintain our shorts against USD despite the recent consolidation. We continue to recommend a short basket of KRW, TWD and SGD versus the USD.”
“Competitive devaluation risks could resurface, especially with these currencies experiencing short-term appreciation pressure in the aftermath of the FOMC.”
“We also recommend 6m USD/MYR call spreads due to the low energy price environment.”