The emerging market currencies that react the most to global surprises

Buddhika Weerasinghe/Getty Images

If you like to dabble in emerging market currencies, you may find the tables below from Deutsche Bank of interest.

The first shows the current rank, based of Deutsche Bank modelling, of the currencies that benefit the most from positive external shocks.

Deutsche defines a positive external shock as:

  • weaker US dollar index
  • lower US 10-year real rates
  • strength in US and euro-area stocks
  • a higher gold price
  • lower VIX
  • tighter spreads between European periphery and core bond yields
  • higher crude oil, and
  • a narrowing in the spread between offshore and onshore traded Chinese yuan.

Any currency with a green shading tends to do well, while those shaded red tend to lag.

Deutsche Bank

It defines the opposite of these developments as a negative external shock.

As this second table shows, many of the currencies that tend to benefit from positive shocks are often the most susceptible to negative external shocks.

Deutsche Bank

While this provides a guideline as to how currencies may react the most to positive and negative surprises, it’s only a guideline as to what’s happened in the past.

Deutsche also adds the disclaimer that individual rankings change substantially depending on the external surprise.

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