Optimism
that moves from both the Central Bank of the Republic of Turkey and Central
Bank of Russia to raise respective interest rates late last week should provide
investors with inspiration to invest in emerging markets is wearing thin at the
beginning of the week.
A
number of emerging market currencies have dipped lower against the Greenback
early today, as a number of different external uncertainties around the global
economy contribute to investor reluctance towards purchasing emerging market
currencies at their current levels.
Due to
the unpredictable nature of external uncertainties around matters like trade
tensions, it is difficult to buy into the headlines that we have approached a
turning point for the emerging markets. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
External uncertainties remain intense and until there are consistent
indications that these are being removed from the atmosphere, it is more likely
than not that investors will prefer to adopt a guarded approach towards the
currencies that belong to emerging market assets.
The
Indian Rupee is a prime example of a currency that is repeatedly facing
pressure from uncertain external headwinds. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The Rupee is also the most notable headline mover at the beginning of the week,
weakening over 1% at time of writing to edge close to its recent historic lows
against the Dollar. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The pressure on the Rupee has come in spite of authorities taking several
measures to prevent the currency from further weakness, but the unpredictable
nature of various external headwinds that are weakening investor sentiment
towards the emerging markets generally is preventing the Rupee from a period of
recovery.
There
is no disputing that one of the main contributors to the uncertain external
environment is mixed messages when it comes to the status of trade talks
between the United States and China. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Conflicting reports remained a theme over the weekend when indications
circulated that on one hand President Trump has provided the green light for
additional Chinese tariffs being met, with other reports that Beijing was
considering rejecting the offer from Washington to resume trade talks.
This
ultimately suggests to investors that we are no closer to an “exit” door when
it comes to prolonged trade uncertainty. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
As such, it wouldn’t be a major surprise if investors remain “risk off” as
trading for the week gets underway.
One
emerging market currency that is in line for volatility throughout the upcoming
week is the South African Rand. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Not only will the Rand remain sensitive to the various external uncertainties
that are providing headwinds to emerging market assets, but there is some quiet
speculation that the monetary policy meeting later this week could result in a
change of interest rate policy in South Africa.
The
South African Reserve Bank (SARB) is truly situated in a very unenvious
position. The Rand is a leading contender for being sensitive to external
headwinds away from South Africa, but the news that the economy has entered its
first recession since 2009 provides an indicator that the SARB should consider
lowering interest rates. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The problem is that if the SARB does lower interest rates later this week, that
it will increase inflationary risks for South Africa.
The
British Pound is another currency that will be exposed to volatility throughout
the upcoming week. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
UK Prime Minister Theresa May is set for another round of key Brexit
discussions throughout the week and the Pound has shown on various occasions in
the past couple of weeks that it remains highly sensitive to Brexit headlines. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
If concerns mount that the United Kingdom is heading towards a hard Brexit, we
shouldn’t be surprised if the GBPUSD once again falls below 1.30 this week.
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