Implied volatility in emerging market currencies and their G7 peers is widest since June – Bloomberg
|In its latest analytical piece, published late-Sunday, Bloomberg relies on the volatility gaps between the currencies of the emerging markets and those from the Group of Seven (G7) while citing market pessimism near the end of the third quarter (Q3). The report also mentioned findings from Goldman Sachs and Deutsche Bank to flag risks.
Key quotes
Goldman Sachs Group Inc. is asking investors to put their money into high-yielding currencies, such as the Mexican peso, the South African rand and Russian ruble, but only ‘once the dust settles.’
Deutsche Bank AG is taking a ‘more defensive stance’ on emerging-market credit as it expects increased volatility from the U.S. election to fuel a selloff in risky assets.
Central banks in India and the Philippines are both forecast to keep interest rates on hold Thursday, as they balance the need for additional stimulus against a backdrop of rising market volatility.
FX implications
With the risk of further widening in the market’s volatility, as inferred from option contracts and the upcoming key risk events line US elections and Brexit deadline, safe-havens like the US dollar may keep the throne. As a result, Antipodeans and commodities are likely to witness further downside.
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