12 Jul 2013
Flash: Reserve diversification, USD remains king - SocGen
FXstreet.com (Barcelona) - Reserve diversification out of the USD should slow or stop for a while in emerging markets reserves, notes Sebastien Galy, Currency Strategist at Societe Generale, who adds "not only due to a deep focus on risk management, but also the lack of better opportunities than the USD."
According to Galy, at present, "only CNY, INR and to a far lesser extent AUD and NZD have any significant appeal when considering their risk reward (yield scaled by risk) and CDS relative to the US." While the fundamental picture is not supportive for the Indian Rupee, and challenging for the Australian Dollar, "CNY is saddled with some difficulties but has been popular" Galy says. However, in term so of appeal, the New Zealand Dollar "is the only one of interest both tactically and strategically, although unsurprisingly, the RBNZ does not seem particularly keen on being saddled with an expensive currency" " Galy added.
Overall, it suggests "the USD remains king" Galy concluded.
According to Galy, at present, "only CNY, INR and to a far lesser extent AUD and NZD have any significant appeal when considering their risk reward (yield scaled by risk) and CDS relative to the US." While the fundamental picture is not supportive for the Indian Rupee, and challenging for the Australian Dollar, "CNY is saddled with some difficulties but has been popular" Galy says. However, in term so of appeal, the New Zealand Dollar "is the only one of interest both tactically and strategically, although unsurprisingly, the RBNZ does not seem particularly keen on being saddled with an expensive currency" " Galy added.
Overall, it suggests "the USD remains king" Galy concluded.