EM currencies

Pity the poor Mexican peso. Despite the view in the market that Latin America’s second biggest economy is set to outperform its emerging market peers in 2014, the currency has been taking it to the chin since the start of the year. Read more

Previously, beyondbrics looked at stock exchange winners and losers of 2013. Now it’s the turn of the EM currencies.

Which currencies felt the full force of the 2013 sell-off, and which survived unscathed? Read more

As Christmas approaches in London, flutter-hungry bookies start taking bets on the likelihood of snowfall.

Are EM currency falls this month a safer bet?

Benoit Anne of Société Générale has crunched the numbers and found that EM currencies tend to lose value in December, to a greater extent than the yearly average. Read more

After Unilever, it was the turn of Casino, the French retailer, to feel the sting of emerging market currency fluctuations on Monday.

The company, which generates two-thirds of its trading profit from Latin America and Asia, said while third quarter like-for-like sales from these markets grew 12.5 per cent, the weakening of currencies such as the Brazilian real and the Argentine peso this summer meant sales, when converted into euros, actually fell 6.2 per cent during the period.

The currency headwinds meant overall group sales ended the quarter flat at €11.8bn compared to the same period last year. This despite marked improvement in its key French market. Read more

Emerging market economies with current account deficits have had little to smile about since Ben Bernanke first mentioned ‘tapering’ of QE in May.

This chart (after the break) from Aberdeen Asset Management shows the strong correlation between current accounts and currency strength. Countries such as Indonesia, India, Turkey, South Africa and Brazil, running large deficits, are being punished with drastically weakening currencies. Read more

A roulette wheelEmerging market currencies that were the hardest hit by the summer’s sell-off rallied on Monday after Lawrence Summers pulled out of the race for the Federal Reserve, raising hopes that easy monetary policy in the US will continue for longer.

The South Africa rand climbed 1.3 per cent to R9.807; the Turkish lira gained 1.4 per cent to TL2.02600 and the Indian rupee – which hit a succession of record lows earlier in August – rose 1 per cent to Rs62.83, a near one-month high. Read more

As the G20 kicks off in St Petersburg, one of its dominant themes is a rising swell of complaints over the effects of US monetary policy.

Simply put: the US tapers quantitative easing, and the days of easy money for emerging markets are over – and currencies get hit. So who’s complaining, and how bad has it been? Read more

From stocks to bonds to currencies, whichever way you cut it, it’s been a quarter to forget for emerging markets. Having soared to new heights at the start of the year as money gushed in, the asset class suffered a rude awakening in June after the US Federal Reserve announced that it could soon start scaling back its massive bond programme. Here’s a review of the quarter in a couple of charts. Read more

Here’s a question to wow them with at the next pub quiz: what’s the best-performing EM currency over the past six weeks?

Answer – probably, Argentina’s “blue” peso – if you were to look at the widely-watched black-market dollar rate from the other way around. Argentina’s blue rate is the name for the illegal exchange rate that is widely-followed now that Argentina’s official peso has become a virtually unconvertible currency. Read more

Emerging market assets suffered another bout of sell-off on Wednesday after the US Federal Reserve said it could start reducing the pace of its bond buying programme this year and end it altogether around the middle of next year.

The MSCI Emerging Markets Index fell 1.3 per cent to close at its lowest level since last September. Read more

The coming end of QE has loomed very large this month, not least in emerging markets. Too large, says Fred Neumann of HSBC, who argues that while the gradual reduction of the US Federal Reserve’s huge monetary easing is important, it will be mitigated by the rush of new cash coming from elsewhere, principally the Bank of Japan. Read more

It’s often wishful thinking, but there comes a point in a mass sell-off when investors decide enough is enough. And so it was on Wednesday, with a near-1 per cent bounce in the Indian rupee against the US dollar, after weeks in which it had been in the forefront of a global plunge in emerging markets. Read more

It’s been a bad few weeks for EM currencies. The South African rand and the Indian rupee have taken a particular hammering, helped along by violent mining-industry unrest in the former and apparent policy paralysis in the latter. The Turkish lira, too, has been badly shaken by the past fortnight of violent protest.

None of those currencies, though, would have fared quite as badly were it not for the fear that the Fed’s quantitative easing programme may be coming to an end. And nowhere is the undiluted end-of-QE effect clearer than in Latin America. Read more

Oh the cruel irony. After lobbying for a weaker currency for the past three years, Brazil’s government would now give anything to strengthen the real, it seems.

The central bank sold a whopping $2.1bn of currency swaps on Monday to prop up the real against the dollar after it hit its weakest intraday level since May 2009. Read more

Brazilian real dropped as low as R$2.1496 per USD on Friday – its weakest level since May 2009.

Let’s hope all those Brazilian companies that have been issuing dollar bonds have a currency hedge out. Read more