30 Jan 2014
Flash: EM weakness triggered by Taper talk - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale has taken a look at the recent events in Turkey and South Africa.
Key Quotes
"The Turkish Lira enjoyed only the briefest of rallies after the CBRT hiked rates on Tuesday night. The SARB followed up with a rate hike yesterday but that didn't help the rand at all. And while the Fed maintained a steady course, reducing bond purchases by a further $10bn in a rare unanimous vote, 10-yr Treasury yields dipped below 2.7%, diverging further from the trend in EMFX."
"EM weakness was triggered last year by talk of tapering and the subsequent move higher in Treasury yields. Now developed markets are watching EM and risk aversion is spreading. The cart is well and truly ahead of the horse! 2014's strongest currencies are the US dollar and the Japanese yen, and Treasuries are trouncing equities in terms of returns so far."
Key Quotes
"The Turkish Lira enjoyed only the briefest of rallies after the CBRT hiked rates on Tuesday night. The SARB followed up with a rate hike yesterday but that didn't help the rand at all. And while the Fed maintained a steady course, reducing bond purchases by a further $10bn in a rare unanimous vote, 10-yr Treasury yields dipped below 2.7%, diverging further from the trend in EMFX."
"EM weakness was triggered last year by talk of tapering and the subsequent move higher in Treasury yields. Now developed markets are watching EM and risk aversion is spreading. The cart is well and truly ahead of the horse! 2014's strongest currencies are the US dollar and the Japanese yen, and Treasuries are trouncing equities in terms of returns so far."