Group Economics
EM FX Weekly
Macro & Financial Markets Research Roy Teo, Georgette Boele, Peter de Bruin,
EM FX referendum scenarios
+31 20 6297789
2 July 2015 • • • • •
Weak EM FX on strong US dollar, higher US Treasury yields and the Greek saga Greek YES-vote should support currencies with strong fundamentals Greek NO-vote would result in a sharp deterioration in sentiment and hurt FX with weak fundamentals A Grexit will have limited negative impact on CE3 ABN AMRO: most accurate overall forecaster for Asian currencies for 4 consecutive quarters
Strong US dollar, higher US yields and Greek saga
significant downturn in the eurozone, which is not our base
This week emerging market currencies have been weak. The
scenario. A Grexit would also, in our view, reduce the chance
stronger US dollar and higher US Treasury yields pushed them
that these countries would eventually enter the euro.
lower. Moreover, the Greek saga also weighed on currencies, especially currencies from Central and Eastern Europe. In
Asian currencies more resilient
case of a Greek NO-vote, currencies with weak fundamentals
Asian currencies have been more resilient compared to other
such as the Turkish lira, South African rand, Brazilian real and
emerging market currencies due to better economic
Indonesian rupiah would suffer because of a sharp
fundamentals and smaller economic exposure to Greece. In
deterioration in investor sentiment. A YES-vote (our
addition, Asian central banks have built up larger foreign
expectation) will likely improve investor sentiment and should
currency reserves since the Fed tapering dry run in the middle
support currencies of countries with strong fundamentals such
of 2013. Nevertheless in the event of Greece referendum NO-
as currencies of Central Europe.
vote on 5 July, we expect the Indonesian rupiah to be the worst performer among Asian currencies given the relatively
Weaker EM FX
weak growth inflation dynamics and current account deficit. On
Performance versus USD in USD terms
the other hand, we expect the Chinese yuan to be the most resilient given that the exchange rate regime is less open and
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the central bank has large foreign currency reserves to limit volatility in the yuan. 0
ABN AMRO: most accurate overall forecaster for Asian currencies for 4 consecutive quarters
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We are proud to highlight that in the recent quarterly Bloomberg FX ranking, ABN AMRO was ranked the most RUB
HUF
PLN
MXN
TRY
KRW
CLP
CZK
IDR
ZAR
BRL
THB
SGD
TWD
INR
CNY
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Source: Bloomberg
CEEMA FX in case of a Grexit Although Bulgarian, Romanian and Serbian banks’ have large exposures to Greece, this is not the case for the countries in central Europa. Banking exposure to Greece of Polish, Hungarian and Czech banks is negligible. Russia also has hardly any exposure to Greece, though Turkish banks have an exposure of around 4% of Turkish GDP. In terms of trade, CE3 countries are shielded from a downturn in Greece, with trade exposures to the country generally being less than 1% of total trade. Poland, Hungary and the Czech Republic would only face an indirect exposure, if a Grexit were to lead to a
accurate overall forecaster for Asian currencies for four consecutive quarters from 2014 Q3 to 2015 Q2.
ABN AMRO emerging market currency forecasts USD/CNH 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 USD/CLP
02-Jul 6.20 64 1,125 1.35 33.78 30.93 13,337 56 2.69 12.27 4.19 27.50 314 3.13 15.74 638
Q3 2015 6.26 65 1,130 1.37 33.80 31.30 13,500 52 2.85 12.20 3.95 27.50 315 3.15 15.50 630
Q4 2015 6.30 65 1,130 1.40 34.00 31.50 13,700 50 2.85 12.20 3.90 27.50 320 3.20 15.50 630
Source: ABN AMRO Group Economics
Q1 2016 6.35 65 1,140 1.42 34.50 31.80 13,800 48 2.85 12.20 3.85 27.40 320 3.20 15.25 635
Q2 2016 6.37 66 1,150 1.43 34.80 32.00 13,900 47 2.85 12.20 3.85 27.25 325 3.25 15.25 640
Q3 2016 6.38 66 1,150 1.44 34.80 32.20 14,000 46 2.85 12.20 3.85 27.00 325 3.30 15.00 645
Q4 2016 6.40 66 1,150 1.45 34.80 32.50 14,100 45 2.85 12.20 3.85 26.75 330 3.40 15.00 650
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EM FX Weekly - EM FX referendum scenarios
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