Halister News

(Bloomberg) -- U.S. election results on Nov. 8 will set the dollar’s tone versus EM currencies into year-end as large volatility may occur if outcome triggers a reassessment of the currently priced-in December Fed rate hike.

• MAIN RISKS

• CEEMEA
• Political developments in South Africa will be eyed as Finance Minister Pravin Gordhan is due to appear in court on fraud charges related to approval of a former colleague’s early retirement at the Revenue Service
  • Any departure of Gordhan from his role would increase pressure on the rand ahead of S&P’s assessment of the country’s rating on Dec. 2; strategists see a downgrade to non-investment grade if Gordhan departs
• In Turkey, the central bank meets on Nov. 24 after holding the overnight rate unchanged in October for the first time since February; the lira’s depreciation poses questions on how the central bank will react

• LATAM
• U.S. election is crucial for MXN as currency is likely to be impacted if Trump wins; peso could remain volatile ahead of election day
• Brazil’s spending cap bill, a key fiscal reform, is awaiting Senate approval and first round of voting is seen on Nov. 29
  • Bill is expected to pass by a large margin of votes; thus, any surprise may trigger BRL volatility
• Congress also eyed in Colombia where tax reform debate begins; approval is key for country to sustain its investment grade and for govt to project political strength after defeat on peace deal referendum in October

• ASIA
• Broad dollar strength is helping to push USD/CNH toward psychological 7.00 level for first time ever; yet, declining 6- and 12-month CNH forwards suggest some investors may be using outright positioning to lock in dollar gains; chart here
• Rising G-10 yields are putting upward pressure on Singapore rates, which may lead to a higher trading range for SGD 5- year swaps toward year-end; swaps now above convergence of 50- and 100-DMAs, with possible extension toward 200-DMA at 1.89%; chart here

• CALENDAR (based on local dates)
• Nov. 1: China PMI; Korea CPI and exports
• Nov. 2: Singapore PMI; South African Finance Minister Pravin Gordhan is due to appear in court
• Nov. 3: Turkey CPI
• Nov. 4: Malaysia trade balance and foreign reserves; Turkey sovereign debt to be rated by S&P
• Nov. 5: Colombia CPI
• Nov. 5-7: Indonesia 3Q GDP
• Nov. 7: China foreign reserves; Taiwan exports
• Nov. 8: U.S. elections; China trade balance; Taiwan CPI; Chile CPI
• Nov. 9: China CPI, PPI; Thailand central bank meeting; Brazil CPI; Mexico CPI
• Nov. 10: Philippines central bank meeting
• Nov. 11: Malaysia 3Q GDP; Korea central bank meeting; Chile Imacec; Colombia Minutes
• Nov. 14: China IP and Retail Sales; India CPI
• Nov. 16: South Africa retail sales
• Nov. 17: Singapore exports; Philippines 3Q GDP; Mexico rate decision; Chile rate decision
• Nov. 21: Thailand 3Q GDP
• Nov. 23: Singapore CPI; Malaysia central bank meeting; Mexico IGAE
• Nov. 24: Turkey, South Africa central banks meetings
• Nov. 25: Colombia rate decision
• Nov. 30: Korea IP; Brazil rate decision
• 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.