5 Aug 2015
Outlook for EM FX remains uncertain – Danske Bank
FXStreet (Edinburgh) - Analysts at Danske Bank have given their views on the EM FX against the current backdrop of generalized downside pressure in that space.
Key Quotes
“EM currencies have fallen to the lowest level against the USD since the Asian financial crisis in 1997/98. The commodity collapse has driven the EM FX fall; the next driver is likely to be higher US rates”.
“We see CA deficit currencies like the TRY, ZAR, BRL and COP vulnerable to higher USD funding costs; CNY and CEE currencies are the anchors of stability”.
“China risks, continuing downward revision of EM growth forecasts and local dynamics remain medium-term EM concerns”.
“Over the coming 3 months, Fed rate expectations and the oil collapse should weigh on EM FX, particularly on CA deficit currencies and the RUB”.
“Over 3-12 months, we expect selective EM currencies like MXN and ZAR to stabilize on a shallow Fed hiking cycle, valuation and recovering commodities”.
Key Quotes
“EM currencies have fallen to the lowest level against the USD since the Asian financial crisis in 1997/98. The commodity collapse has driven the EM FX fall; the next driver is likely to be higher US rates”.
“We see CA deficit currencies like the TRY, ZAR, BRL and COP vulnerable to higher USD funding costs; CNY and CEE currencies are the anchors of stability”.
“China risks, continuing downward revision of EM growth forecasts and local dynamics remain medium-term EM concerns”.
“Over the coming 3 months, Fed rate expectations and the oil collapse should weigh on EM FX, particularly on CA deficit currencies and the RUB”.
“Over 3-12 months, we expect selective EM currencies like MXN and ZAR to stabilize on a shallow Fed hiking cycle, valuation and recovering commodities”.