FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that cross-correlations between currency pairs have risen in the past fortnight as the broad dollar theme as re-established itself.
Key Quotes
“The prospect of further ECB easing has weighed on EUR as well as CHF and SEK. Expected changes in policy rates have been the dominant driver over the past months, but currency performance has also been aligned with the levels of policy rates. Macro drivers remain in the backseat. Indeed the continental European currencies have underperformed the dollar bloc as well as the US dollar despite boasting stronger growth momentum and current account surpluses.”
“EM: Contrary to G10, trendiness in the EM FX universe has not improved and volatility remains at high levels. There has been a decrease in uniformity over the last two weeks, but overall EM currencies continue to be highly correlated.
Equity performance has become highly correlated with FX movements, and the relationship is broad-based. This contrasts with other drivers that explain outlier performances of individual currencies. RUB, for instance, continues to do well with the improvement in Russia’s sovereign credit risk. The macro environment, by contrast, has had little systematic bearing on EM currencies in the past three months.”
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