Italian Markets Shrug off Banking Morass and Local Election Results

new businessThe US dollar is mostly slightly firmer as North American dealers return to their posts.  Ideas that the UK Tories are getting close to a deal with the DUP appears to be lending sterling a modicum of support, as it tries to extend its uptrend into a fourth session.  The Japanese yen is the weakest of the majors, rising equities, and yields, spurs the dollar to re-challenge last week’s high near JPY111.80.  

Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended last week on a firm note, though most were still down for the week as a whole.  Commodity prices stabilized, but the balance remains fragile, in our view.  We remain cautious, especially with regards to the high beta currencies such as BRL, MXN, TRY, and ZAR.  Continue reading

Surge in Positioning amid Currency Contract Roll

new business

The expiration of the June contracts and the roll into September positions appears to have boosted activity in the currency futures, and may obscure the signaling effect.  Of the 16 gross positions we track, speculators add to exposure in all but four positions.  There speculators covered gross short Swiss franc, Canadian, Australian, and New Zealand dollar positions.  

Continue reading

Dollar Upticks Fragile Without Interest Rate Support

Blog icons - FX Outlook dollarThe US dollar edged higher against most of the major currencies over the past week. However, the fundamental backing is still not solid, and it makes as wary of these upticks, even though we think a bottom is being carved. Specifically, the US interest rates still not finding much traction, and President Trump’s legislative agenda still is encountering significant resistance within the Republican Party.  

Continue reading

What Has Changed in EM


  • MSCI announced it will include 222 China Large Cap A-shares in its Emerging Markets Index
  • Czech central bank is pushing out rate hike expectations
  • Hungary central bank eased again using unconventional measures
  • MSCI announced that it has launched a consultation on reclassification of Saudi Arabia from Standalone to Emerging Market status
  • South African court ruled that the Zuma no confidence vote can be secret
  • South African government official wants to change the mandate of the central bank
  • Brazil Senate committee rejected the labor reform bill by a 10-9 vote
  • Banco de Mexico signaled an end to the tightening cycle  Continue reading

Short Summary Weekly MOF Portfolio Flows

New Japan

Japan’s Ministry of Finance reports portfolio flows on a week weekly basis.  It provide more timely, even if less detailed information than contained in the monthly balance of payments data.  


In the first few months of the year, Japanese investors were net sellers of foreign stocks and bonds. However, this has changed in the second quarter.   Japanese investors were net buyers of foreign bonds for seven of the past eight weeks.  Last week, they bought JPY1.09 trillion of foreign bonds, which is the third highest of the year.   Ironically, it appears they sold the when bonds were weak and are returning to the buy side when bonds are firm.  Japanese investors bought an of JPY403 bln of foreign bonds a week last year, but despite the recent buying, have been net sellers of JPY80.4 bln on average a week this year.  

Continue reading

Dollar Pares Gains Ahead of the Weekend

Usa - United States flag in speech bubble

  • Flash manufacturing PMI for Japan and flash PMIs for the Eurozone had little impact on the capital markets.
  • In the US, politics is eclipsing economics in the week after the FOMC hiked the Fed Funds target
  • Markit reports the flash PMIs for the US today, and the government reports existing home sales; three Fed officials speak ahead of the weekend.
  • Brazil mid-June IPCA inflation is expected to rise 3.48% y/y vs. 3.77% in mid-May

Continue reading

Some Thoughts on Recent Argentina Developments

new argentinaArgentina has been in the news this week.  Whilst MSCI delayed its decision on reclassifying Argentina, the nation was still able to place $2.75 bln of 100-yaer bonds even as the economy emerged from recession.  We remain positive on the medium-term outlook, and believe that foreign investors should continue to build up Argentine exposure.  Continue reading

Bond Yields, Inflation, and More

new sign

It all seems so reasonable.  US Treasury yields have fallen around 50 bp since the March rate hike.  Market-based measures of inflation, like the 10-year breakeven and the five-year/five years forward, have fallen around 35 bp over the same period.  That is to say that the decline in market-based measures of inflation expectations can account for nearly three-quarters of the decline in nominal yields. 

Continue reading