EM FX Weekly
Group Economics Macro & Financial Markets Research Roy Teo +65-6597 8616, Georgette Boele,
Mixed performance
Peter de Bruin +31 20 343 5619
8 May 2015 • •
Asian currencies fail to profit from dollar weakness Monetary policy in Eastern Europe remains supportive
Mixed performance
Polish Central Bank keeps rates on hold at ultra-low levels
In general, emerging market currencies showed a mixed
Following last week’s aggressive rate cut by the Russian
performance despite the weak US dollar. Asian currencies
central bank, this week, the central bank of Poland left its
were generally weak, while Eastern European currencies and
reference rate on hold, at 1.5%, as was widely expected. The
currencies of commodity exporting countries performed
NBP had reduced its key rate earlier this year in response to
relatively well. The latter is mainly the result of higher
the fall in oil prices. However, in its statement it stressed that
commodity prices.
rates are likely to remain on hold for the foreseeable future. Indeed, an ‘expected gradual acceleration’ of growth, helped
Asian FX lower: driven by weaker domestic sentiment
by a ‘recovery’ in the eurozone and a ‘good situation’ in the
Despite weak investor sentiment towards the US dollar in the
domestic labour market were all expected to reduce the risk of
past week, most Asian currencies did not fare well due to
inflation remaining below the target in the medium term. We
weaker domestic data. The South Korean won (KRW) declined
think that we have to wait for the first rate hike at least until the
by more than 1% as the manufacturing sector contracted at the
second half of 2016.
fastest pace since October 2014. We also suspect that the central bank was in the market to weaken the won due to
…while the Czech central bank will continue to use the
increasing concerns that the weak Japanese yen would
koruna as policy instrument
adversely impact South Korea’s exports. The Indonesian
Meanwhile, the Czech central bank, which has already brought
rupiah (IDR) also underperformed as economic growth in the
its policy rate to a technical zero, reiterated its intention to use
first quarter expanded at the slowest pace since the third
the koruna exchange rate as an additional instrument to ease
quarter of 2009. With inflation still above the central bank’s
monetary policy conditions. As such, the koruna is kept close
target, the unfavourable growth and inflation dynamics were
to CZK 27 to the euro. In addition, the central bank stressed
negative for the IDR. The Indian rupee (INR) was also not
that it remains ready to move the exchange rare to an even
spared due to slower growth outlook and concerns that firmer
weaker level if deflationary risks were to materialize. We think
oil prices will widen the trade deficit.
that such a move will not be necessary. The Czech economy, as the Polish economy, will benefit from the upswing in the
KRW real effective exchange rate and exports growth %
Reverse scale Level
50 40 30 20 10 0 -10 -20 -30 -40 Jan-08 Apr-09
80 90 100 110 120 Jul-10
Oct-11 Jan-13 Apr-14
Exports YoY% (lhs)
KRW REER (rhs)
Source: BIS, South Korea Ministry of Trade, Industry and Energy
eurozone, its main trading partner, and an improvement in its labour market. This should underpin growth and help inflation to eventually pick up again.
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
08-May 6.21 64 1,088 1.33 33.53 30.70 13,107 51 2.69 12.02 4.06 27.50 303 3.03 15.30 609
Q2 2015 6.25 63 1,100 1.36 32.80 31.50 13,100 53 2.80 12.00 3.95 27.50 310 3.30 15.25 630
Q3 2015 6.30 64 1,130 1.39 33.20 32.00 13,200 52 2.85 12.20 3.95 27.50 315 3.25 15.50 630
Q4 2015 6.35 64 1,130 1.40 34.00 32.10 13,300 50 2.85 12.20 3.90 27.50 320 3.20 15.50 630
Source: ABN AMRO Group Economics
Q1 2016 6.40 64 1,140 1.42 34.50 32.30 13,400 48 2.85 12.20 3.85 27.40 320 3.20 15.25 635
Q2 2016 6.41 65 1,150 1.43 34.80 32.50 13,500 47 2.85 12.20 3.85 27.25 325 3.10 15.25 640
Q3 2016 6.43 65 1,150 1.44 34.80 32.80 13,600 46 2.85 12.20 3.85 27.00 325 3.10 15.00 645
Q4 2016 6.45 65 1,150 1.45 34.80 33.00 13,700 45 2.85 12.20 3.85 26.75 330 3.10 15.00 650
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EM FX Weekly - Mixed performance
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