Photo: Flickr/ epSos.de
The currency markets are in flux with rising market volatility, particularly with investors fleeing the euro and searching for a new safe haven.A note out from Morgan Stanley’s Global Currency Research team last night provides an in-depth roundup of where they’re bets stand.
Check out their take on which currencies stand to rise and fall amid market uncertainty.
Watch: Payrolls, FOMC Minutes, Trade, Claims, Retail Sales, U-Mich
- USD will be a safe haven in a volatile market.
- There are short term risks, however, like Chinese CPI next week.
- BOE from the QE will probably boost dollar value.
- Long against a basket.
Watch: German Industrial Production and Trade, CPI, Slovakia EFSF Vote
- The euro's value will probably decline alongside eurozone growth
- Slovakia's vote on the EFSF remains risky
- However, the ECB decision yesterday to maintain rates means the euro has room to grow
Watch: Leading Index, BOJ, Eco Watchers, Machine Tool Orders, CGPI
- The yen remains a safe haven as eurozone uncertainty grows.
- Domestic JPY purchases will increase too because Japanese exporters are under-hedged.
- Consensus is for no action to stem currency appreciation at the Bank of Japan meeting next week.
- Long against a basket.
Watch: PPI, BRC Sales, RICS House Prices, IP, Weekly Earnings ex Bonus
- Bank of England's decision to undertake quantitative easing will deflate the currency.
- Recession in the United Kingdom looks worse than expected.
- Activity data could result in more QE.
- Short against a basket.
Watch: Unemployment Rate, PPI
- Economic indicators came in weak, even though CPI was higher than expected.
- Slow domestic growth could lead to more aggressive action from the Swiss National Bank, depreciating the franc further.
Watch: Housing Starts, Trade
- The CAD will receive near-term support from the employment report out today.
Watch: Business Confidence, Consumer Confidence, Home Loans, Employment
- The currency is strongly tied to international growth.
- The Aussie will struggle as emerging markets are called upon to support the developed world.
- The AUD could rally if Chinese inflation comes in under expectations.
- Short against USD and JPY.
Watch: Consumer Confidence, PMI, Food Prices
- New Zealand's economy relies heavily on foreign capital, so its economic growth prospects look grim.
- PMI numbers are highly anticipated.
- Cautious on the currency, but risk is probably to the downside.
Watch: Industrial Production, CPIF, Unemployment Rate
- Although treated as a quasi-safe-haven recently, cash flows will slow as the economy decelerates.
- The currency will trade narrowly in the short term, and deflate in the future with the global economy.
Watch: Consumer Confidence, CPI, Trade Balance
- The peso has weakened 20% since July.
- Risks in Europe threaten the currency's value, but positive data from the U.S. could have a positive effect.
- Cautious on the MXN until there's greater transparency in global data.
Watch: Trade Balance, Producer Prices
- The sell-off in rubles is unjustified because of the country's strong external position.
- The country has lots of FX reserves and a strong current account, though capital could leave the country because of the electoral cycle.
- Capital outflows are a risk, but bullish in the medium-term.
Watch: Inflation, Current Account, Money Supply
- Intervention caps the downside risk.
- Even so, slowing growth, a strong role in the local bond market, and credit tightening suggest a weaker Polish Zloty.
- Sell the PLN on rallies.
Watch: Industrial Production, Current Account
- Central bank intervention is capping downside risk, so the Turkish lira could be a relative outperformer.
- Deteriorating global economic conditions are still at play, though.
Watch: Gross Reserves, Manufacturing, Gold Production
- High market correlation mean the South African rand will probably be volatile in the short-term.
- USD/ZAR is probably on the rise, with bond market outflows and global economic pressures.
Watch: Inflation IPCA, FGV CPI, Trade Balance
-The Brazilian government will continue cutting interest rates to promote growth as commodities decline.
- A USDBRL ceiling, however, will limit weakening and stem downside risks.
- Bearish on the real, despite a 23% weakening since July.