29 Apr 2016
FX volatility to decline on risk reversals - ANZ
Analysts at ANZ explained that China is once again accelerating and the growth pulse in the US is struggling.
Key Quotes:
"It looks a lot more like 2010 than 2015 right now. While this continues, FX volatility looks high and likely to decline, and carry will remain in vogue.
As such investors are unlikely to sell Asia or commodity currencies aggressively.
We remain sceptical of the longevity of these trends. Structural considerations, like the debt burden in China and the smaller output gap in the US, make the sustainability of this cyclical uptick questionable.
Positioning has also made the market more vulnerable to downside surprises than positive ones."
Key Quotes:
"It looks a lot more like 2010 than 2015 right now. While this continues, FX volatility looks high and likely to decline, and carry will remain in vogue.
As such investors are unlikely to sell Asia or commodity currencies aggressively.
We remain sceptical of the longevity of these trends. Structural considerations, like the debt burden in China and the smaller output gap in the US, make the sustainability of this cyclical uptick questionable.
Positioning has also made the market more vulnerable to downside surprises than positive ones."