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25 Sep 2015
Drivers of EM currencies weakness to remain intact - BBH
FXStreet (Córdoba) - According to the Brown Brothers Harriman Team, the recent recovery in emerging markets currencies could be short-lived and they look for a continuation of the long-term bearish move.
Key Quotes:
“Many (EM) currencies established multi-year and/or all-time lows before recovering. We see this most recent bounce as short-covering in an extremely oversold market. As such, we look for a continuation of the ongoing long-term bearish EM move.”
“We see the major drivers for ongoing EM weakness remaining intact: 1) the dollar has resumed appreciating against the majors; 2) global growth remains weak; 3) commodity prices remain soft; and 4) the looming Fed tightening cycle that will lead to higher rates in the US."
“We expect further volatility and weakness ahead for most of EM FX, and so dedicated EM investors should look for relative value opportunities. Divergences within EM will continue to be seen, especially in light of the renewed drop in commodity prices. In general, we continue to favor Asia, with EMEA next and Latin America last.”
Key Quotes:
“Many (EM) currencies established multi-year and/or all-time lows before recovering. We see this most recent bounce as short-covering in an extremely oversold market. As such, we look for a continuation of the ongoing long-term bearish EM move.”
“We see the major drivers for ongoing EM weakness remaining intact: 1) the dollar has resumed appreciating against the majors; 2) global growth remains weak; 3) commodity prices remain soft; and 4) the looming Fed tightening cycle that will lead to higher rates in the US."
“We expect further volatility and weakness ahead for most of EM FX, and so dedicated EM investors should look for relative value opportunities. Divergences within EM will continue to be seen, especially in light of the renewed drop in commodity prices. In general, we continue to favor Asia, with EMEA next and Latin America last.”