Group Economics
Daily Insight
Macro & Financial Markets Research Peter de Bruin & Aline Schuiling +31 20
EM FX reserves under the microscope
343 5619
22 September 2015
EM FX reserves have continued to fall, led by China, though some EM’s are showing resilience France’s government bond ratings downgraded, outlook stable
EM markets’ FX reserves continue to slide,..
Emerging Markets’ FX reserves have started to slide US dollar, trillions
According to IMF International Financial Statistics Data, total Emerging Markets’ FX reserves fell from a peak of $8.21 trillion in June of last year to $7.61 trillion in June of this year. Although reserve levels for most emerging markets remain
10 8
adequate, the slide in FX reserves is a clear sign of the stress
6
emerging markets are currently experiencing. Central banks in
4
emerging markets have been forced to sell FX reserves to
2
defend their currencies, EM economies enjoy smaller inflows of foreign money due to lower commodity prices, and foreign investors are withdrawing their money in anticipation of the Fed’s tightening cycle.
0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 FX reserves total Emerging Markets FX reserves total Emering Markets ex. China Source: IMF, Thomson Reuters Datastream
… with China taking the lead,.. Around half of the $0.6 trillion drop in reserves can be explained by China’s FX interventions to keep the CNY from
France downgraded …. Rating agency Moody’s downgraded France’s sovereign
depreciating too much, though its reserve levels remain
rating from Aa1 to Aa2 last Friday. The outlook was changed
abundant in comparison to the country’s imports and foreign
to stable from negative. The agency referred to the continued
debt. However, other emerging economies such as Saudi
weakness in France’s medium-term growth outlook. Combined
Arabia, Turkey, and South Africa have also seen their reserves
with ‘institutional and political constraints this poses challenges
decline, albeit to a lesser extent. The IMF data only run until
for the material reduction in the government’s high debt burden
June, but judging from monthly central bank data, total
over the remainder of this decade’, according to Moody’s.
Emerging Markets FX reserves have continued to fall over
Indeed, France has fallen into the legion of eurozone countries
recent months, with China again taking the lead.
that grow below the average. This is largely because France’s competitive position has deteriorated in recent years, as unit
…though some EM’s show resilience In contrast, some Emerging Markets are managing to swim against the tide. For instance, India’s FX reserves are on a
labour costs rose more strongly than the eurozone total, while the country implemented limited economic reforms compared to countries such as Spain, Portugal and Greece.
modest upward trend, reflecting its improved external position. Brazil’s reserves are also showing resilience and are moving broadly sideways. This reflects a modest improvement in the country’s current account deficit and ongoing inflows related to foreign direct investment. Finally, in Russia, despite the renewed weakness in oil prices, the panic that we saw at the end of last year has clearly abated. This is leading to lower capital outflows and in conjunction with Russia’s current account surplus is helping the country’s FX reserves to stabilise.
… but recent reforms help to make the outlook stable That said, the government has recently pushed through a number of reforms that should improve the flexibility of the labour market and enhance efficiency in product markets. Moreover, labour costs for companies have been reduced by lowering the labour tax wedge. These measures should have a positive impact on economic growth in the longer-term, starting in 2016. In its decision to change the outlook for France to stable from negative, Moody’s took these factors into consideration as well. Financial markets did not react to Moody’s decision in a significant way.
2
– 18 September 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1193
0.0268
-0.6744
120.46
-0.0829
0.0332
-7.4806 0.5677
AUD/USD
0.7133
0.0140
-0.1260
-12.7462
USD/CHF
0.9720
0.0206
-0.2053
-2.2428
NZD/USD
0.6330
0.1899
-0.3934
-18.8149 -0.4237
GBP/USD
1.5511
0.0258
1.0884
USD/SGD
1.4115
0.1064
0.6776
6.4881
USD/CAD
1.3243
-0.0905
-0.0453
13.9575
Bond markets
Close
Change 1 day
Change 5 days
Change YTD
2-year German Govt Bond yield
-0.2340
0.0020
0.0030
10-year German Govt Bond yield
0.6840
0.0210
0.0290
-0.1360 0.1430
Yield curve Germany
0.9180
0.0190
0.0260
0.2790
2-year US Treasury Bond yield
0.7062
0.0285
-0.0194
0.0417
10-year US Treasury Bond yield
2.2012
0.0676
0.0181
0.0300
Yield curve US
1.4950
0.0391
0.0375
-0.0117
US 2-year sw ap rates
0.8283
0.0003
-0.0653
-0.0660
US 10-year sw ap rates
2.2043
-0.0066
-0.0652
-0.0818
US sw ap curve
1.3760
-0.0069
0.0001
-0.0158
EU 2-year sw ap rates
0.0720
0.0000
-0.0005
-0.1030
EU 10-year sw ap rates
1.0370
0.0400
0.0470
0.2250
EU sw ap curve
0.9650
0.0400
0.0475
0.3280
-0.0380
-0.0010
0.0000
-0.1160
0.3192
-0.0259
-0.0180
0.0636
JPMorgan EMBI Plus Sovereign S
404.3100
-0.7900
-13.5800
16.8700
Equity markets
Close
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
18,070
-1.96
-1.06
3.55
Hang Seng Index
21,757
-0.75
0.90
-7.83
Hang Seng China Enterprises Index
9,899
-1.29
1.75
-17.40
Australian Stock Exchange S&P/ASX 200 Index
5,121
1.07
2.04
-5.37
Singapore Straits Times Index
2,882
0.09
0.38
-14.35
Euro Stoxx 50 Index
3,185
0.87
0.29
1.22
S&P 500 Index
1,967
0.46
0.71
-4.47
MSCI World Daily Total Return Gross USD
737
-0.26
0.60
-3.97
AEX Index
433
1.28
1.15
1.96
20
-9.61
-16.95
4.90
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz Generic first NYMEX Crude Light future Generic first Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
Close
Change 1 day % Change 5 days %Change YTD%
197
1.37
0.54
1,133
-0.02
2.53
-14.38 -4.36
46
-0.99
3.66
-13.23
49
-0.76
4.12
-15.31
5,269
0.29
-0.75
-16.37
495
-0.30
0.10
-16.02
3
– 18 September 2015
Day
Date
Time
Country
Monday Monday Monday
21/09/2015 21/09/2015 21/09/2015
15:45:00 16:00:00 20:00:00
EC US MX
Tuesday Tuesday Tuesday
22/09/2015 22/09/2015 22/09/2015
13:00:00 14:00:00 15:00:00
Wednesday Wednesday Wednesday Wednesday Wednesday
23/09/2015 23/09/2015 23/09/2015 23/09/2015 23/09/2015
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday Friday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
ECB announces weekly QE details Existing home sales - % mom Policy rate - %
Aug Sep 21
-4.8 3.0
-1.2 3.1
-0.8
TR HU US
Repo rate - % Base rate -% FHFA house price index - % mom
Sep 22 Sep 22 Jul
7.5 1.4 0.2
1.4 0.5
0.4
03:45:00 10:00:00 10:00:00 10:00:00 15:45:00
CN EC EC EC US
PMI manufacturing - index (Caixin) - flash PMI services - index Composite PMI output PMI manufacturing - index Markit - Flash PMI
Sep P Sep P Sep P Sep P Sep P
47.3 54.4 54.3 52.3 53.0
47.8 54.2 54.1 52.2
54.5 54.2 51.8
24/09/2015 24/09/2015 24/09/2015 24/09/2015 24/09/2015 24/09/2015 24/09/2015
06:30:00 10:00:00 10:00:00 11:10:00 13:00:00 14:30:00 16:00:00
NL DE NO EZ CZ US US
Producer confidence manufacturing - index Ifo - business climate - index Policy rate - % ECB allotment TLTRO-5 - EUR bn Repo rate - % New durable goods orders - % mom New homes sold - % mom
Sep Sep Sep 24
107.9
3.0 108.1
Sep 24 Aug Aug
3.5 108.3 1.0 73.8 0.1 2.2 5.4
0.1 -2.2 1.5
-2.0 1.4
25/09/2015 25/09/2015 25/09/2015 25/09/2015
01:30:00 10:00:00 14:30:00 16:00:00
JP EC US US
CPI - % yoy M3 growth - % yoy GDP - % qoq annualised Univ. of Michigan cons. confidence - index
Aug Aug 2Q T Sep F
0.2 5.3 3.7 85.7
0.1 5.4 3.7 87.6
5.5 3.7 85.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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