|Day's Range||19.243 - 19.278|
|52 Week Range||18.7282 - 20.6501|
The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.8%, while the Chilean and the Colombian pesos rallied 1%, getting an extra boost from a rally in metal and oil prices. U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, ended a second day of talks in Washington on Friday and Bloomberg News reported the two sides had reached a partial agreement that would lay the groundwork for a broader deal. The surge in risk appetite and a rally in the pound on rising hopes of a Brexit deal pressured the dollar.
The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.7% to 19.31 per dollar, while the Chilean and the Colombian pesos rallied about 0.8%, getting extra boost from a rally in metal and oil prices. The rally came as U.S. President Donald Trump said U.S.-China trade talks were going well as the second day of top-level negotiations got under way. Investors are hoping the two sides will agree to a deal that could avert further retaliatory measures, while expectations of a last-minute Brexit deal between the European Union and Britain as well as approval of a North American trade deal all added to the optimism.
The British pound continues to soar, on optimism that a withdrawal deal could be close at hand. The Mexican peso continues to rally late in the week. The Canadian dollar is steady, but we could see stronger movement in the North American session, when Canada releases key employment numbers.
The Mexican peso could fall almost 9% to 21.30 per dollar next year if U.S. President Donald Trump again threatens the country during his re-election campaign, Mexican financial group Banorte said on Tuesday. Trump has repeatedly sent the Mexican currency and stock market tumbling after attacking Mexico over immigration and trade, mostly on Twitter, threatening to impose tariffs on Mexican goods or close the countries' shared border. Banorte's forecast would represent an 8.7% depreciation for the currency from its current level of about 19.60 pesos per dollar.
(Bloomberg) -- Trade war-hardened emerging-market investors aren’t counting on any breakthrough in trade negotiations as talks between the U.S. and China are set to resume Thursday in Washington.BNP Paribas Asset Management has been reducing its exposure in junk-rated debt, while Union Investments Privatfonds GmbH is favoring investment-grade rated bonds over high-yield debt. And in case any breakdown in discussions triggers a flight to safety, Aviva Investors has been been buying the yen.“We expect another empty-handshake meeting,” said Bryan Carter, London-based head of emerging-market fixed-income at BNP Paribas Asset. Ultimately, no substantive agreement will be reached, he said.Emerging-market stocks rebounded 2.2% since an early September low, when China and the U.S. announced they would hold face-to-face negotiations once again. The rally has since petered out after President Donald Trump said he won’t seek an interim agreement and global growth showed further signs of deterioration as the year-long trade war dragged on. Impeachment proceedings have also spurred concern that it may hinder Trump’s hand in the negotiations.Below are comments from investors and analysts:Maddi Dessner, multi-asset strategist at JP Morgan Asset Management in New York, tells Bloomberg Television:Bar is much lower for U.S.-China trade talks this week than it has been in previous negotiations“Investors are much more conservatively positioned than they were even six months ago,” so there’s not as much of a negative riskTo have exposure to equities, investors can buy futures, stocks or upside calls, which allow them to gain upside in rallies and lose equity risk in their portfolio when market draws downBrendan McKenna, a currency strategist at Wells Fargo in New York:“Trade relations between the U.S. and China will probably get worse before they get better”No trade truce or breakthrough this week, and Trump will probably move forward with plans to increase and impose more tariffsEscalations will hurt EM currencies broadly, especially emerging Asia’s IDR, INR and PHP; High-beta currencies TRY, ZAR, MXN and BRL likely to also come under pressureExpect more downside in the renminbi and more risk-sensitive currencies such as the AUD, NZD, KRWJim Caron, global head of macro strategies at Morgan Stanley Investment Management in New York:Trade tensions put a damper on global growth, and expectations are for continued talks“I don’t think that anybody really expected there to be a grand bargain this week with China”Alejandro Cuadrado, a senior BBVA strategist in New York:Likes being “defensive (USD biased) with a preference for hedging through CLP” ahead of trade talks“Our expectations are low as we don’t see the incentives fully lined up”Prefers hedging through options in LatAm crosses given region’s sensitivity to global trade, lower levels and higher costsSergey Dergachev, senior portfolio manager at Union Investment in Frankfurt:Expectations for a breakthrough are “very low,” though it will be important to see how the meeting will end and the mood during the meetingFuture steps are also crucial, such as when the next round of talks will beDergachev said he’s positioned “mildly defensive,” and is focusing on the credit quality of his holdingsWerner Gey van Pittius, co-head of emerging-market fixed income at Investec Asset Management in London:The trade war will last longer than what the market is hoping because it’s not just about trade. There’s an element in the U.S. that is afraid of “the geopolitical rise of China” and that is much bigger than just trade right nowChina is preparing for the next decade and trying to reduce the impact of the trade war by opening up their markets, attracting capital, and moving away from U.S. influence by selling Treasuries and buying gold. Their time horizon is beyond the U.S. electionsHe is taking a long duration strategy in his bond portfolio as the trade war raises the risk of a recessionCarter at BNP Paribas Asset:Politics are driving the negotiations, and not economicsThe upcoming 2020 presidential election, and impeachment investigations in the House, are the dominant context for the trade meetingCarter said he plans to continue cutting exposure to junk-rated bonds even if there was a positive outcome from the meeting. That’s because the firm doesn’t expect any comprehensive agreement will be reached that would reverse the negative economic effects of the trade warMark Haefele, global chief investment officer at UBS Global Wealth Management in Zurich, tells Bloomberg Television:Base case is for tensions to neither worsen or improve much, with the U.S. to go ahead with the announced additional tariffsUBS Global is underweight equities globally at this time; the trade impact will be felt hardest in Europe and emerging markets, while the S&P will probably be range-boundStuart Ritson, emerging-market bond fund manager at Aviva Investors in Singapore:It is hard to be too optimistic on the outcome of trade talks given the narrow scope of the discussionsThe firm’s local-currency bond portfolio is “relatively defensive” at the moment, given the weak global growth backdrop. It is also positioned for further easing by EM policy makers and has increased exposure to the yen, given its anti-cyclical properties, and still attractive valuationsRobert Carnell, chief economist for Asia Pacific at ING Groep NV in Singapore, writes in a note:China may see it as advantageous to keep the trade war alive, but under control, pending political developments in the U.S.For the U.S., the benefits of fighting China on trade may now be outweighed by the short-term hit to the economy, in terms of popular support and potential votes for Trump at next year’s presidential electionStephen Innes, an Asia-Pacific market strategist at AxiTrader, writes in a report:In the absence of a significant catalyst, Asian currencies will continue to track the yuan, which remains the best global barometer for trade war riskHeadline risk will continue to influence trading flows in the Chinese currency(Updates with analyst comments throughout)\--With assistance from Sydney Maki, Aline Oyamada, Chester Yung, Netty Ismail and Carolina Wilson.To contact the reporter on this story: Lilian Karunungan in Singapore at email@example.comTo contact the editors responsible for this story: Tomoko Yamazaki at firstname.lastname@example.org, Karl Lester M. YapFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
It has been a slow start to the new trading week. The Canadian, British and Mexican currencies are all showing limited movement on Monday. With no major releases on Monday, traders can expect a quiet North American session.
(Bloomberg) -- Follow @Brexit and sign up to our Brexit Bulletin. Brandywine Global Investment Management LLC has made a stronger pound one of its major bets, saying the currency is eventually poised to strengthen to $1.50 following a successful Brexit deal.Sterling is set to rebound to that level within two years as sentiment toward U.K. assets improves once the Brexit turmoil has been resolved and as the dollar weakens, said Jack McIntyre, a portfolio manager in Philadelphia at Brandywine, which oversees $75 billion. Both the U.K. and European Union have plenty of incentives to reach a deal, he said.“If we’re right about the dollar on a multi-year downtrend, then sterling could trade up to $1.50,” McIntyre said in an interview in Singapore. “The last thing the EU or Europe needs is a weak U.K. economy or a recession. They’ve got to get growth. Both the U.K. and EU have got to find some common ground.”The pound has tumbled about 17% since the day before the Brexit referendum in June 2016 and touched a three-year low of $1.1959 last month. Sterling hasn’t been above $1.50 since early on June 24 when the initial results of the ballot came out. The currency traded at $1.2343 in Asian trading Friday.Prime Minister Boris Johnson has been given a week by the EU to revise his Brexit deal or risk a postponement of the U.K.’s departure, three EU officials said, citing a meeting between diplomats. The U.K. is due to exit the bloc on Oct. 31, and Johnson has said he will never agree to delay Brexit beyond that date.‘Buying Opportunity’McIntyre said the pound would remain attractive even in the event of no-deal outcome. “If it’s a hard Brexit, sterling falls off sharply, that probably is a buying opportunity,” he said.Hedge funds and other speculative investors remain bearish on sterling, holding a net 33,281 contracts betting the currency will weaken, according to data from the Commodity Futures Trading Commission as of Sept. 24.The positioning doesn’t faze McIntyre, who is also keeping a close watch on the uptick in mergers and acquisitions in the U.K., which he views as another sign of growing confidence in the nation’s economy.June and July were among the busiest months for mergers and acquisitions targeting U.K.-listed companies since the Brexit vote in 2016, with 25 deals pending or completed during the two months, according to data compiled by Bloomberg.“We’re seeing a ramp up in M&A activity from non-U.K. companies investing in U.K. companies,” McIntyre said. While a cheaper currency will help attract overseas investors, “you wouldn’t buy a company just for that, you’re buying it because you have a longer-term positive view of the U.K.,” he said.Here are some of McIntyre’s other investment views:Underweight dollar against Mexican peso, Brazilian real, and Australian and New Zealand dollarsCompany remains buyer of longer-maturity U.S. Treasuries although it trimmed some of its overweight positions in 30-year securities in AugustFavors Treasuries over European and Japanese government bondsLikes emerging-market local currency government debt, including those of Mexico, Brazil and Colombia(Adds preference for Treasuries in third bullet.)To contact the reporter on this story: Ruth Carson in Singapore at email@example.comTo contact the editors responsible for this story: Tan Hwee Ann at firstname.lastname@example.org, Nicholas ReynoldsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- It’s not shaping up to be a very comfortable start to October. Although we’re only two days into the month, emerging-market assets of most shades were on the back foot again, and for once it was difficult to blame the trade war. This time, analysts pointed to poor manufacturing readings and weaker data across the developing world in general as reasons for the listlessness. There were plenty of idiosyncratic stories to dull the palate too, notably in South Korea, Turkey, Poland, Peru and Brazil.Biggest LoserSouth Korea’s won was the biggest loser in the foreign-exchange market after Pyongyang tested at least two ballistic missiles, hot on the heels of a promise to resume stalled talks with the U.S. over its nuclear program.Turkey ReturnsTurkey’s lira, the best-performing emerging currency behind the ruble and Mexican peso in the past month, went into retreat as President Recep Tayyip Erdogan expressed his readiness to act alone in northeast Syria and retake areas from American-backed Kurdish forces. Turkish stocks remained little changed, underlining the continued allure of the real returns achievable from the country’s equities. Tugce Ozsoy reports on that today from Istanbul.Ruble’s Reckoning?The ruble was having its seventh off-day in a row, defying recent analysis suggesting it would not only be among the biggest winners in the event of a trade deal but could also prove a haven if the global economy slides into a recession. Commerzbank AG sees the Russian currency weakening to 66 per dollar before long. A report today was forecast to show the economy expanded less than 1% for a second consecutive quarter in April-June. And the technicals aren’t offering much comfort either. Though it’s still the biggest winner this year in the emerging-market currency stakes, is this the ruble’s moment of reckoning?China ScenariosEven when the country is on a five-day break, you can never ignore China. Analysis today from Bloomberg’s emerging-market strategist, Simon Flint, sets out the significance of what may turn out to be a below-6% growth rate in the world’s second-biggest economy. Meantime, Sydney Maki explores how traders play the China story through the rest of the EM universe when the country has its feet up.Peruvian IndifferenceThough the chaos sweeping Peru’s political landscape represented another risk to the EM story, the price action suggested a remarkable sense of indifference among the trading community, largely predicated on the country’s healthy fiscal accounts. Peruvian dollar bonds maturing in 2050 yielded 3.30% at the close yesterday, the second-lowest yield on a 30-year bond in Latin America after Chile. It’s a point well captured in a piece from Latin America reporters Justin Villamil and Aline Oyamada.Brazilian HoseThe action in Brazil may be interesting today. President Jair Bolsonaro’s proposal to overhaul Brazil’s pension system just passed the first of two votes on the Senate floor but it then got watered down as lawmakers approved an amendment to the bill. They’ve clearly got a very efficient hose in that Brazilian assembly. Joking aside, it’s unlikely to upset the hardened narrative that the reforms will finally see the light of day later this month. Note that the main Brazilian ETF trading in Japan was looking stronger earlier today.Loan Ruling LoomsNow Poland. While there’s a central bank policy decision today -- and it’s forecast to be a no-change -- there’s a potentially much more significant event looming tomorrow. Namely, the verdict from the European Union’s top court over Polish foreign-currency loans. The ways in which this cookie could crumble are complex and difficult to predict, as discussed in our Speaking of EM podcast today. But the biggest risk perhaps is that in the wake of the ruling, courts will force banks to convert the Swiss franc mortgages into zloty at the exchange rate from the day the loan agreements were signed. Needless to say, that could be very bad for the zloty.A Bit of CheerFinally, a bit of comfort for the longer-term. As Lilian Karunungan reports today, the stock of payments due on emerging-market corporate debt is set to tumble by almost a third next year. Companies have $303 billion of dollar-denominated bond repayments in 2020, down about 32% from this year and the least in four years, according to data compiled by Bloomberg. The decline is most evident in Latin America and Asia. Given the much-anticipated dollar retreat looks as far off as ever, it’s a welcome salve for the EM universe.To contact the reporter on this story: Justin Carrigan in London at email@example.comTo contact the editors responsible for this story: Justin Carrigan at firstname.lastname@example.org, Marton EderFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Regional currencies lost between 0.06% and 0.6%, with the Mexican peso slipping to its lowest in nearly one month, while Colombia's peso touched an all-time low. U.S. manufacturing activity tumbled to a more than 10-year low in September as lingering trade tensions weighed on exports, data showed, stoking fears of slowing growth in the world's largest economy.
LATAM's surge saw Chile stocks jump up to 2.5% during the session and hit their highest in almost five months, outperforming regional peers. Delta bought 20% of LATAM for $1.9 billion in a major new airline partnership, but also sold its stake in Brazil's largest airline Gol, which sent shares 6.5% lower followed closely by Gol's loyalty program, Smiles Fidelidade, which slid 5.3%.
Mexico's main stock index dipped 0.2%. The country's central bank cut the benchmark interest rate by 25 basis points for a second time this year, to 7.75%. "It's bit on the dovish side, which means there are more cuts ahead, which is reasonable," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman.
Mexico's peso and stock market slumped on Wednesday in response to an impeachment inquiry against U.S. President Donald Trump, with trade experts warning the probe risked derailing the passage of the USMCA trade deal through U.S. Congress. Mexico's peso slipped 0.9% versus the dollar to an almost three-week low against the dollar and the benchmark stock index fell 1.24%, with banks citing the move against Trump by Democrats on Tuesday as sapping investor appetite for risk.
Currencies linked to oil prices pop on Monday after an attack on Saudi Arabian oil production facilities over the weekend knocked out 5% of the world’s production, with some analysts speculating that it could take months to bring the facilities back online.
The Sao Paulo. index rose 1%, with materials stocks pushing up the index the most. Chilean stocks rose about 0.3% and were slated for a seventh straight session of gains. The Mexican peso rose about 0.4% to near a one-month high.