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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: ItsAllCyclical who wrote (109041)	12/16/2014 11:41:04 PM
From: elmatador	1 Recommendation Recommended By ItsAllCyclical Respond to of 220280

EM safe havens: where oh where are they? Jonathan Wheatley \| Dec 16 13:57 \| In the long-running battle between contagion and differentiation in emerging markets, contagion currently has the upper hand. That’s hardly surprising when you look at the size of the shock coming out of Russia and the failure of Monday night’s 650 basis point interest rate rise to deal with it. Nothing on this scale has been seen since 1998. Rouble per US dollar, year to date. Source: Thomson Reuters But contagion is not absolute and some EM currencies are bucking this month’s sharp falls, at least for now. Below, we present charts that show how the big EM currencies are faring in these times of extreme stress. No other currency is suffering as the rouble but some are coming close. Below is the Turkish lira. Unlike Russia, Turkey benefits from cheap oil. Its current account deficit, a perennial concern for investors, narrows by more than $400m with every $10 fall in the oil price. But Turkey has been caught up in EM risk aversion, helped along by a political crisis that President Recep Tayyip Erdogan has done nothing to dissipate. Turkish lira per US dollar, year to date. Source: Thomson Reuters It’s a different story in Brazil, where you would expect the real to be doing badly given Brazil’s status as a commodity exporter. It is not yet, however, the significant net oil exporter it is destined to become (assuming Petrobras ever emerges from scandal). Rather than oil, Brazil is suffering from contagion, as one of the most liquid EM foreign exchange markets there is, and by the failure of its new economics team to reassure markets about the seriousness of their orthodox intentions. Brazilian real per US dollar, year to date. Source: Thomson Reuters Also tanking is the Nigerian naira, another oil exporter in the eye of the cheap oil storm. Attempts by the central bank to assert itself as the naira went into free fall may, however, be paying off. Nigerian naira per US dollar, year to date. Source: Thomson Reuters There is no chart showing what has happened to the Venezuelan bolívar this year: it is unchanged, at the official rate, at 6.28 to the dollar. The unofficial rate, however, has reportedly gone into the stratosphere, hitting 183.7 to the dollar on Tuesday according to dolartoday.com, from 64 at the start of the year and 159 on December 1. But for an indication of what investors think of Venezuela’s prospects as the oil price plunges, here is its 5-year credit default swap: Venezuela 5-yr CDS, year to date. Source: Thomson Reuters All of the above might be expected to be doing badly in current circumstances. Not so the Indian rupee. India is a beneficiary of cheap oil and its government has been doing pretty much what investors could wish for – not least, taking the opportunity to cut fuel subsidies. But India, too, is a liquid market and investors have taken the exit door. Indian rupee per US dollar, year to date. Source: Thomson Reuters It is a similar story with the Indonesian rupiah: it, too, could be expected to gain from cheap oil and from an investor-friendly government. But the EM tide is still sweeping against it. Indonesian rupiah per US dollar, year to date. Source: Thomson Reuters Nor has the South African rand done much better. It held up fairly well during the early stages of falling oil, as would be expected. But this month it, too, has been swept away. South African rand per US dollar, year to date. Source: Thomson Reuters The Polish zloty is another currency that is suffering more than might be expected, given its solid reputation as an EM safe haven. It has, indeed, weathered the recent extreme storm very well, though only after losing about 12 per cent of its value against the dollar this year to the end of November. Polish zloty per US dollar, year to date. Source: Thomson Reuters That leaves just the Korean won moving against the tide. It has strengthened sharply this month, perhaps buoyed up by its current account surplus. But its exports are threatened by Japan’s expansionary Abenomics and the falling yen. The won may be one of the few safe havens around but it may not be one for long. Korean won per US dollar, year to date. Source: Thomson Reuters