Halister News

(Bloomberg) -- A resurgent U.S. dollar heading into December FOMC meeting and speculation of portfolio flow re-balancing to the States are main themes for EM investors as year-end approaches. Risk of persistent outflows from EM may reignite talk of the fragile five currencies.

• MAIN RISKS
• CEEMA
  • According to HSBC, Turkey is the most exposed to strong dollar and shifts in risk sentiment
  • Turkish lira is poised to close the year as worst performer in the CEEMEA basket, losing as much as 15% against USD
  • Turkey’s central bank meets on Dec. 20 after the surprising rate hike in November failed to alleviate market concerns over the currency’s weakness
  • South Africa rating review and political developments in focus

• LATAM
  • Trump’s potential remarks on his future govt and Banxico will continue to serve as main drivers for MXN; investors split between a 25bps or 50bps hike for Dec. 15 in attempt to anticipate FX depreciation impact on inflation
  • BRL traders will continue monitoring potential Odebrecht’s plea bargain deal tied to carwash probe, which haunts politicians and may impact approval of necessary measures such as social security reform
  • Stabilization of commodities prices likely to be key for traders to start taking risky positions as copper and oil are strong proxies of CLP and COP
    • Banrep’s non-unanimous decision last week increased odds of a rate cut as soon as next month which may impact Colombian peso

• ASIA
  • India’s central bank decision will take into account the surging banking system liquidity, a result of the ban on 500 and 1,000 rupee notes. A slightly hawkish lean by RBI may help put a floor under rupee in the near term after the currency dropped to a record low in November; chart here
  • China’s forex reserves could be in focus as SAFE is lowering the threshold on reportable foreign currency transactions to $5m from $50m. FX outflows moderated to $40b in October from $78b in September, according to Goldman Sachs calculations based on SAFE data on onshore FX settlement and cross-border movement of yuan

• CALENDAR (based on local dates)
• Dec. 2: U.S. non-farm payrolls; Singapore PMI; South Africa sovereign debt to be rated by S&P
• Dec. 5: Turkey’s CPI; Chile IMACEC, Colombia CPI
• Dec. 6: South Africa GDP; Brazil minutes
• Dec. 7: China foreign reserves; Malaysia trade balance and foreign reserves: India central bank meeting; Taiwan exports; Chile CPI
• Dec. 8: China trade balance; South Africa manufacturing production; Mexico CPI
• Dec. 9: China CPI, PPI; Brazil CPI; Colombia minutes
• Dec. 12: Turkey’s GDP; Russia GDP
• Dec. 13: China IP and Retail Sales; Brazil spending cap bill vote; Chile rate decision
• Dec. 14: FOMC rate decision; Indonesia central bank meeting; South Africa CPI
• Dec. 15: Bank of Korea meeting; Indonesia trade balance; Mexico rate decision
• Dec. 15-31: Taiwan central bank meeting
• Dec. 16: Singapore exports; Russia central bank meeting; Russia industrial production; Colombia rate decision
• Dec. 20: Turkey’s central bank meeting
• Dec. 21: Malaysia CPI; Bank of Thailand meeting
• Dec. 22: Malaysia foreign reserves; Philippines central bank meeting; Mexico IGAE
• Dec. 23: Singapore CPI
• Dec. 29: Korea IP; Mexico minutes

• NOTE: Davison Santana and Mark Cranfield are FX strategists who write for First Word. The observations they make are their own and not intended as investment advice.