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EM update: 'Usual suspects' are under pressure
Wed, Jan 9 2008, 12:29 GMT
by Lars Christensen, Lars Rasmussen
Risk aversion has risen today after US equities and bond yields plummeted last night. Although the bulk of the Emerging Markets currencies remain fairly stable today, we are also seeing several currencies under heavy selling pressure most notably in the Romanian and Icelandic FX markets. In the credit markets we in general see CDS and yield spreads widening in Romanian, Bulgarian, Kazakh, and Icelandic markets. It is significant that there is no pressure in the Baltic markets, which normally have been trading in line with the other suspects.
We suspect nervousness and continued concerns about funding are the drivers behind the weakness among the group of usual suspects. In relation to our open trading suggestions we therefore recommend to stay put with the positions:
- • PLN/SKK has been fairly stable over the last couple of days, we are still expecting a move toward PLN/SKK 9.32, and we might lift our targets if this level is hit.
- • EUR/RON has moved roughly 1.4% higher this morning, as it hit 3.64. It is now flirting with EUR/RON 3.63, and we feel investors might want to try to test December highs, where EUR/RON came close to 3.70, before the local central bank intervened to support the Romanian leu. We have lifted our stop loss from 3.53 to 3.60, and we still take profit if 3.70-level is reached.
- • EUR/ISK has moved 1.4% higher today from pre-opening levels around EUR/ISK 91.3 to the current level around 92.6 on concerns about funding needs.
- • USD/ZAR has been fairly stable today, as higher interest rates and a record-high gold price level underpins the South African rand.
Published on Wed, Jan 9 2008, 16:13 GMT
Archive
- CEE: Buy EUR/PLN
Published On Wed, Sep 10 2008, 15:04 GMT - EMEA: Buy EUR/TRY
Published On Wed, Jul 2 2008, 10:40 GMT - CEE/CIS: We are still long PLN/CZK, but more cautiously
Published On Wed, Apr 23 2008, 13:08 GMT - CEE: Buy PLN/CZK
Published On Mon, Apr 14 2008, 13:00 GMT - CEE: Buy CHF/HUF, buy CHF/RON
Published On Wed, Mar 19 2008, 14:43 GMT
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