REAL-TIME GLOBAL RESEARCH
EM FX
Key takeaways
- Laoise Ni Thighearnaigh AC
- Perhaps signs of bottoming out in usd/rub, though it took a move down to 83.25 around the open first!
- The pair then bounced to close around 83.75/00.
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Research evidence excerpt
Laoise Ni Thighearnaigh AC
JPMorgan Chase Bank N.A, London Branch
Perhaps signs of bottoming out in usd/rub, though it took a move down to 83.25 around the open first! The pair then bounced to close around 83.75/00. Not much new to add, other than saw a smattering of corporate ndf hedging, though nothing particularly out of the ordinary.
Holding on to a small long usd position, believing that the Minfin fx purchase programme will drive Ruble weaker in coming weeks.
ZAR
Not much from Warsh, although the market has taken it dovishly on the back of his supply side comments and that the ‘world has largely conformed to our expectations’. Chances of a October fed hike continue to diminish, even with a hot CPI and PPI this week. For the rand I am not overly sure this week has made the picture clearer. I had been planning to buy a dip in USDZAR towards 16.40 given the AI sell off, however stocks recovered yesterday and risk trades ok. Ultimately USDZAR remains in the middle of the range, and with no strong conviction happy to sit on the sidelines.
TRY
We remain long TRY. State banks are on the offer at 49.5275 with a 1100 pips weekend adjustment. The faster weekly depreciation pace (of 2100 pips) has taken some juice out of the long TRY trade, but we still don't think it changes the short term story. For offshore clients the bigger risk has always been a sudden adjustment, and allowing more depreciation through the regular managed path should reduce some of that risk. We have also seen decent leveraged unwinds over the last couple of days, so positioning will be cleaner. The carry still pays enough over the next couple of months and positioning is nowhere near where it was at the summer highs.
We still think that the bigger thing to watch is local retail flows. So far there is very little sign of stress, but if CBT keeps running Fx at the faster pace while also cutting rates aggressively, TRY deposits gradually become less attractive and at some point local retail may start buying more USDTRY. That is probably the main risk to the trade now. If we start seeing a significant
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