Emerging Market currencies to extend weakness into H2 2018

In its latest FX outlook for H2 2018, the Barclays Research Team notes that the US dollar is likely to be the preferred currency amid trade war fears and Fed’s monetary policy tightening.

Key Quotes:

“The USD likely to strengthen a little against the EUR and weaken a little against the JPY.

Our year-end forecast for the EURUSD and USDJPY crosses are 1.12 and 107, respectively.

The one persistent trend in currencies should be the continued weakness of emerging markets against the USD.

Given the backdrop of rising trade frictions that should disproportionately affect EM, the earlier mentioned rise in US short-term rates, as well as country-specific challenges in some high profile EM economies, EM currencies still do not offer compelling value.

We expect USDCNY and USDINR to finish the year at 6.6 and 72, respectively.”

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