Optimism on some emerging-market currencies
By Peter Rosenstreich
Emerging-market (EM) currencies have weakened as the US yield curve has steepened, yet the US Federal Reserve appears not to be planning aggressive tightening of money supplies. That means this could be an ideal time to reconsider EM.
India remains a bright spot, as Q3 growth should recover and likely surprise to the upside. Domestic conditions, including consumer spending and a narrowing trade deficit, will support accelerated growth. India’s central bank will likely delay on rate hikes: markets are pricing in a single 0.25% increase in 2018. Poland is another comer. Brexit is likely to work out well for central European economies. Further positive news will be bullish Poland’s zloty.
What does Yellen want?
By Yann Quelenn
In a hearing yesterday with the US Congress, US Federal Reserve Chair Janet Yellen straddled the fence. She said the central bank does not want to “let growth get out of hand.” At the same time, she did not confirm a widely-expected rate hike in December. We believe she is caught in a bind. She and other central bankers say raising rates too soon could push the economy into recession. The real caution, we rather, is that they don’t want to burst the bubble more commonly known as bond markets.
This is why the EUR/USD will climb higher.