Monday, September 21, 2015

Fed: a comfort for EM's? - Rabobank

FXStreet (Guatemala) - Analysts at Rabobank explained that while the market is currently suspicious of the Fed’s reasons for delaying its first rate hike, lower for longer US interest rates should provide some comfort for EM economies, in particular those with large USD denominated liabilities (such as Brazil).

Key Quotes:

"Although weak commodity prices and a messy political situation cannot be resolved by lower US interest rates, on the margin the Fed’s policy decision this week should provide a little tonic in the face of jitters caused by slowing growth in EM. While this is unlikely to be sufficient reassure for investors to aggressive short the EUR in favour of high yield currencies, it should limit room for further broad-based EUR appreciation.

Going forward we continue to expect that the EUR will remain well supported against a variety high yield currencies, particularly EM commodity linked currencies with a strong Chinese exposure such as BRL, ZAR, IDR, RUB and MYR. However, we continue to expect that non commodity linked EM currencies such as PLN and HUF should fare better vs the EUR."
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