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Currencies

20 Aug 2018   Macro, Currencies, Global

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX stabilized last week as the situation in Turkey calmed somewhat. Reports Friday that the US and China are hoping to resolve the trade dispute also helped EM FX ahead of the weekend. However, TRY remains vulnerable as the US threatens more sanctions due to the pastor. Both S&P and Moody’s downgraded it ahead of the weekend and our own ratings model points to further downgrades ahead. Turkish markets are closed this week for holiday.

Russia Seeks to Mobilize Internal Reserves Amid Dollar Liquidity Shortage

The Russian Central Bank tentatively confirmed that the banking sector is experiencing a dollar liquidity deficit. In an apparent push to de-dollarize the economy, it may for now resist from intervening, hoping to encourage more local currency borrowing. But inaction could pile additional pressure on the rouble in coming months.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX has come under pressure again due to ongoing trade tensions and rising US rates, but saw some modest relief Friday after the PBOC announcement on FX forwards. This helped EM FX stabilize, but we do not think the negative fundamental backdrop has changed. Best performers last week were MXN, PHP, and PEN while the worst were TRY, ZAR, and KRW.

Idiosyncratic Challenges Weighing on East Africa’s Local Bond Markets Growth

Since the turn of the century, two trends have notoriously characterised African economies: world-leading rates of growth and high external debt. East Africa has been at the forefront of this growth spurt, much of which came from the vast volumes of cheap dollar funding streaming into EMs from the low-yield environment in Western economies post-2008. But as the global EM sentiment turns sour and investors abandon riskier regions, those high levels of dollar credit are becoming unsustainable, and fostering growth of local debt markets is becoming increasingly urgent.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX saw some violent swings last week, due in large part to some unhelpful official comments. BRL and TRY were the best performers last week, while RUB and CLP were the worst. When all is said and done, however, we think Fed policy remains unaffected and so we remain negative on EM FX. Also, global trade tensions remain high after Trump threatened tariffs on all Chinese imports entering the US.

The Coming US Recession Triggers: What You Need to Know

There are many potential triggers or combination of triggers that investors monitor – increasingly now given where we are in the current cycle – to try to predict when the next recession will arrive. It is hard to pinpoint specific causes historically aside, perhaps, from catastrophic policy (fiscal or monetary) mistakes or unanticipated global economic shocks. The reality is that many of the potential triggers themselves are inter-related and can result from a recession rather than indicate that a recession is imminent.

Juan Pablo Newman on Mexico’s Elections, Peso’s Resilience and Samurai Bonds

As Mexico continues to show resilience in the face of multiple external challenges, including stalemate in the NAFTA negotiations, pressure on the EM currencies from a rallying dollar and global trade wars, its debt capital markets have largely switched into a wait-and-see mode. But issuance windows offer plenty of opportunities, so we speak to Juan Pablo Newman, the Head of Public Credit at the Ministry of Finance, about DCM prospects and a broader outlook for the country’s issuers and borrowers.

Turkey’s Post-Election Challenge: Keeping Monetary and Fiscal Policy in Sync

With a landmark national election in Turkey now having come to pass, we speak with Naz Masraff, Director for Europe at Eurasia Group, a leading political risk consultancy, about the policy mix needed to lift the country out of a tough economic situation.

Brazil: Lessons from the Dollar

Which way will the dollar go? Economists don’t have sufficiently robust instruments to answer that question.

SWOT Analysis: Mexico Elections and Beyond

As Mexico voted in the new president, Bonds & Loans met with a broad range of local finance leaders, corporate chiefs and state officials to discuss the market outlook and get a sense of the risks and opportunities on the horizon.

 

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