Mixed outlook for emerging market currencies — survey
Investors expected to trade cautiously in risky currencies in 2019 with the rand likely to remain relatively steady at 14.30/$ in six months
Yield-hungry investors will trade cautiously in risky emerging market currencies in 2019 against the dollar despite the US Federal Reserve’s recent dovish stance, a Reuters poll found, although there is still interest. “The outlook for high-yielding currencies remains constructive due to the increasingly accommodative messaging from both the ECB [European Central Bank] and the Fed,” said Mike Keenan, a strategist at Absa Capital. Taken in the past week, the survey showed a mixed outlook for emerging market currencies, as Brazil’s real is expected to firm up more than 4% to 3.7/$ while SA’s rand remains relatively steady at 14.30/$ in six months. “That said, a deep global slowdown poses a significant risk to the longevity of the carry trade because under such a scenario, market volatility is likely to spike and investors will probably become more risk averse,” Keenan said. “Carry trades” is a strategy used by investors to borrow in currencies where interest rates are low and therea...
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