investment insights
EM FX Monthly: Climbing a wall of worry, but climbing nonetheless
Key takeaways
- Over the past month, EM FX has shown a positive, albeit mixed, performance, with Asian FX outperforming but LatAm lagging.
- Our preferred list of currencies, which includes CNY, MYR, IDR (Asia), MXN, and PEN (in LatAm) as well as RUB (CEEMEA) have performed better than we had forecast. On the other hand, some currencies on which we were already cautious (like BRL) have understandably underperformed.
- We further upgrade our projections for the CNY, KRW, TWD, MYR, and IDR (Asia) as well as for RUB and CZK (CEEMEA). On the other hand, we tweak MXN higher over H1, but downgrade our BRL and THB forecasts.
- For the CNY, we revise our year-end forecast of 6.80 down to 6.70. Even if a further reduction in tariffs does not occur before 2020, CNY should perform better as USDCNY fixings converge with a softer USD and activity data stabilises over Q1.
- The Wuhan coronavirus epidemic has emerged as a potential wildcard. We will continue to assess the extent of the epidemic and its impact on our scenarios and forecasts.
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