30 Jan 2014
Flash: EM jitters focused on FX - Danske Bank
FXstreet.com (Barcelona) - Anders Møller Lumholtz, Senior Analyst at Danske Bank notes that EM jitters continue to be in focus in the FX markets.
Key Quotes
“Following a series of interest hikes, with the 425bp rate hike from the Turkish Central Bank as the most aggressive one, and very high volatility in yesterday’s trade session, markets have been relatively calm overnight.”
“Overall, a number of EM currencies now trade on fundamentally weak levels but it is still too early to conclude that the rate action from the EM central banks has stabilised the EM currencies.”
“In our view, the ‘lack’ of reaction to Fed’s tapering last night, even though it was expected, could indicate that increased transparency about the outlook for the Chinese economy and the Chinese financial system is more important than the prospect of less accommodative monetary policy in the US for any fundamental rebound in Emerging Markets. This could take some time and thus, caution is still very much warranted.”
Key Quotes
“Following a series of interest hikes, with the 425bp rate hike from the Turkish Central Bank as the most aggressive one, and very high volatility in yesterday’s trade session, markets have been relatively calm overnight.”
“Overall, a number of EM currencies now trade on fundamentally weak levels but it is still too early to conclude that the rate action from the EM central banks has stabilised the EM currencies.”
“In our view, the ‘lack’ of reaction to Fed’s tapering last night, even though it was expected, could indicate that increased transparency about the outlook for the Chinese economy and the Chinese financial system is more important than the prospect of less accommodative monetary policy in the US for any fundamental rebound in Emerging Markets. This could take some time and thus, caution is still very much warranted.”