- Large declines seen in emerging market currencies
- ZAR, TRY and BRL all dropping strongly against USD
- MXN whipsaws on NAFTA talks
We earlier noted the strength seen in the US dollar following the latest retail sales figures, and nowhere can these moves be felt more keenly than in emerging market currencies. The yield on the 10-year US Treasury (Tnote on xStation) hit 3.05% shortly after the data dropped which has seemingly reinforced the divergence between the US and the rest of the world. A rise in US yields can be seen to spell trouble for emerging markets raising concerns over debt, with many of them enjoying a strong rise previously when US yields have declined.
The see of green here reflects depreciation in EM currencies which are the quote currency in this case. Source: xStation
Whilst the increase in US yields is universal amongst the EM space, there are also country specific factors which should be taken into account. Let’s begin with Turkey where the Turkish Lira has hit a record low today after president Erdogan vowed to take greater control of its monetary policy if he wins elections next month. Erdogan was speaking on a visit to London where he restated his commitment to lower interest rates, despite the runaway levels of inflation - in stark contrast to orthodox views on monetary policy.
The USDTRY has hit a record high today with the pairs rise seen since 2003 appearing parabolic. Source: xStation
It’s been a pretty volatile afternoon for the Mexican peso with USDMXN whipsawing after conflicting reports of a quote from Mexico’s Guajardo. Newswires, were running a story that Guajardo had said that he "sees a NAFTA agreement before May 17th" which caused an almost immediate gain in MXN and USDMXN fall lower. However, just 8 minutes later this was correct to include "doesn’t" which entirely changes the meaning of the quote and sent USDMXN rallying higher.
USDMXN reversed earlier declines after it became apparent that the news wires had misquoted Mexico’s Guajardo. Source: xStation
This article is provided for general information purposes only. Any opinions, analyses, prices or other content is provided for educational purposes and does not constitute investment advice or a recommendation. Any research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk, we do not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.