6 Nov 2013
Flash: Emerging markets sell-off to peter out - BBH
FXstreet.com (Barcelona) - Going forward, the downward pressure in emerging markets may start to slow down as chances of a December taper remain slim, at best, notes Marc Chandler, Global Head of Currency Strategy at BBH.
Key Quotes
"We do not think this Friday’s jobs report can have much lasting impact on Fed policy and market perceptions of policy, since data will be distorted. So too will the November jobs data out in early December. So EM FX may be able to gain some temporary traction but we remain more concerned about further selling pressures when tapering is eventually warranted."
"What has changed from the original May sell off is that the policy defenses in many EM countries are now firmly in place. There will be much less confusion about intervention mechanisms, key levels, and official conviction should we face another bout of prolonged EM selling. Hopefully, this will remove some of the impetus behind the panicky moves seen over the summer in EM."
"This has also helped reduce implied volatility in many EM countries. That said, the 3-month implied volatility for most major EM currencies have not returned to pre May-levels (with the exception of USD/KRW)."
Key Quotes
"We do not think this Friday’s jobs report can have much lasting impact on Fed policy and market perceptions of policy, since data will be distorted. So too will the November jobs data out in early December. So EM FX may be able to gain some temporary traction but we remain more concerned about further selling pressures when tapering is eventually warranted."
"What has changed from the original May sell off is that the policy defenses in many EM countries are now firmly in place. There will be much less confusion about intervention mechanisms, key levels, and official conviction should we face another bout of prolonged EM selling. Hopefully, this will remove some of the impetus behind the panicky moves seen over the summer in EM."
"This has also helped reduce implied volatility in many EM countries. That said, the 3-month implied volatility for most major EM currencies have not returned to pre May-levels (with the exception of USD/KRW)."