Oil slide takes it to a level that matters for EM FX - Goldman Sachs

Sandeep Kanihama FXStreet Contributor

The fall in oil prices since mid-May has gathered pace this week, taking Brent crude to just under $46/bbl which is likely to pose threat for the health of EM FX.

Key Quotes

“Using a “threshold regression” approach, we have found that elasticity of EM FX to oil tends to vary with the level of oil prices, with lower prices (typically below $45-$46/bbl based on Brent crude) associated with a larger elasticity for both oil exporter currencies (RUB, MXN and COP) and also broad EM FX. Taking into account that EM FX has been relatively resilient to the fall in oil prices so far, we would reiterate that lower commodity prices, more than the Fed, are the primary risk to the EM FX complex, especially high-yielders.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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