EM FX Weekly
Group Economics Macro & Financial Markets Research Georgette Boele tel,+31 20 6297789 Peter de Bruin, +31 203435619
EM FX further into the red
27 August 2015 • • •
Market rout pushes EM FX further into the red… …but CEEMA FX has been resilient except TRL and RUB We have further lowered our forecasts for CEEMA & South African rand
Market rout pushes EM FX further in the red
adjusted our forecasts downwards, because recent market
The potent cocktail of China, emerging market and commodity
movements have resulted in unrealistic appreciation paths.
fears escalated sharply on Monday. Emerging market commodity currencies and Asia FX showed substantial losses. Currencies of emerging market commodity exporters mirrored
...with the exception of the Turkish lira… In contrast, the Turkish lira has been under heavy pressure due to heightened political uncertainty. Indeed, after the
the price sell-off in commodity prices. Meanwhile, the deterioration in investor sentiment towards China weighed on Asian FX. Last week we already communicated our new Asia FX forecasts and this week we will focus on the adjustments in CEEMA FX and the South African rand.
coalition talks broke down, President Erdogan has called for snap elections in November. Opinion polls suggest that the APK’s popularity has only increased marginally, making it likely that it will again not secure a majority in the coming elections. This suggests that new coalition talks will remain difficult and implies that the country is heading for a prolonged period of
Performance last 5 days
heightened political uncertainty. Therefore, the lira will remain
In % with US dollar as basis
under pressure in the near-term in our view. COP BRL MYR MXN ZAR PEN CLP IDR RUB TRY INR CNH PHP VND ARS CNY THB KRW HUF SGD PLN TWD CZK UAH KZT
-10
-5
0
5
Source: Bloomberg
CEEMA FX has been resilient… Currencies of central and eastern Europe (CEE) excluding Russia have done relatively well for several reasons. The economic outlook of these economies is bright and their performance has surprised on the upside, so far. This reflects that CEE-economies are benefitting from the upswing in the eurozone, their main trade partner. But domestic demand is also strengthening, underpinned by a recovering of the labour market. In addition, these economies are energy importers and will thus benefit from the recent fall in oil prices. Going forward we expect CEE currencies to outperform the euro, because of monetary policy tightening next year. However, we have
…and the Russian rubble and South African rand The Russian ruble and the South African rand also weakened sharply. South Africa’s economy contracted by an annualised 1.3% qoq in Q2. While growth is set to return in the second half of the year, it will remain weak on the back of commodity price weakness, high inflation preventing the central bank from loosening policy, and ongoing electrical power shutdowns due to maintenance work. It is likely that the rand will remain under pressure when the Fed starts hiking interest rates. In Russia, despite some tentative signs of stabilization, the fall in oil prices has continued to weigh on the ruble. The recovery in oil prices we expect should support the ruble.
ABN AMRO emerging market currency forecasts USD/CNY (onshore) USD/CNH (offshore) USD/INR USD/KRW USD/SGD USD/THB USD/TWD USD/IDR USD/RUB USD/TRY USD/ZAR EUR/PLN EUR/CZK EUR/HUF USD/BRL USD/MXN
27-Aug Q3 2015 Q4 2015 6.41 6.50 6.55 6.48 6.55 6.55 66.0 66 66 1,185 1,200 1,240 1.40 1.43 1.46 35.63 36.00 36.40 32.16 32.80 33.40 13,990 14,000 14,300 67 65 60 2.91 3.00 3.10 13.05 13.50 13.50 4.22 4.20 4.15 27.50 27.50 27.50 314 315 315 3.60 3.50 3.60 17.00 15.50 15.50
Source: ABN AMRO Group Economics
Q1 2016 6.60 6.60 67 1,250 1.47 36.60 33.50 14,400 60 3.05 13.25 4.10 27.40 315 3.60 15.25
Q2 2016 6.65 6.65 67 1,270 1.49 36.80 33.70 14,600 55 3.00 13.00 4.05 27.25 310 3.55 15.25
Q3 2016 6.70 6.70 68 1,290 1.50 37.00 33.80 14,800 55 2.95 13.00 4.00 27.00 310 3.55 15.00
Q4 2016 6.75 6.75 68 1,300 1.52 37.30 34.00 15,000 55 2.90 12.50 4.00 26.75 310 3.50 15.00