Be Careful of Emerging Market Currencies

Be Careful of Emerging Market Currencies
By www.ForexConspiracyReport.com

http://www.forexconspiracyreport.com/be-careful-of-emerging-market-currencies/
As the risk of inflation in the USA
backs off it is clear that the Federal
Reserve will be in no hurry to raise
interest rates and drive up the dollar.

Emerging market currencies had their
best quarter this decade on the news.

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Before We Continue…

But all good things must come to an
end.

Bloomberg writes to beware the rally
in emerging market currencies.

Beware the rally in emerging-market
currencies:

the best quarterly performance in
almost seven years is about to
reverse.

“We don’t see continued appreciation
through the rest of the year,” said
Nicholas Bennenbroek, head of
currency strategy at the U.S. bank in
New York.

“Federal Reserve interest-rate
increases should continue at a steady
pace, which should weigh on most
foreign currencies, including Asian
currencies.”

In other words US interest rates will
not go up fast but they will go up.

And tensions on the Korean peninsula
will not be good for North Korea,
Japan or China.

What other specifics tell us to be
careful of emerging market
currencies?

Australia Losing Buyers in
China

The slowing Chinese economy is
taking a toll on Australia, a major
supplier of coal, iron ore and other
commodities.

Pound Sterling Live says the AUD is
increasingly fragile.

“The Aussie Dollar’s long-term
technical forecast was in danger of
being upset last week but the pair’s
recent tumble back to support has
revived the bear’s hopes for a major
downtrend taking hold.

What’s more, the broader argument
for ongoing losses is looking stronger
than ever,” says Matthew Ashley, a FX
Research Analyst for Blackwell
Global.

Ashley says AUD/USD could be
exposed to further weakness should
the neckline of the overarching chart
pattern be broken over coming days,
even in the absence of a major
fundamental shift in sentiment.

Their analysis is based on technical
factors but the fundamentals dictate
that higher US interest rates and
slower business activity in Australia
will hurt the AUD.

Not So Bad for India

A bright spot in emerging markets is
India.

MoneyControl.com says the IMF sees
faster growth for the Indian
economy.

International Monetary Fund (IMF)
maintained India’s growth forecast at
7.2% in FY18, saying the growth path
is on-track with medium-term prospect
favorable.

India’s economy is expected to growth
faster than the slowing economy of
China this year and substantially
faster than that of the EU or USA. The
rupee will likely prosper as well.

Russia, Annexations, the
Ruble and Sanctions

At the middle of 2014 35 rubles got
you a dollar.

Then the price of oil fell, Russia
annexed Crimea and Russian backed
separatists took over a corner of
Eastern Ukraine.

The USA and EU responded with
economic sanctions.

By early 2016 it took 75 rubles to buy
a dollar.

The ruble has steadily strengthened
since then and now the ruble trades
55 to the dollar.

Nevertheless, Russian adventurism
continues in Syria, Ukraine and
elsewhere and despite the election of
Putin-loving Donald Trump to the US
presidency it is unlikely that sanctions
on Russia will soon give way.

Bloomberg notes that Russia is
consolidating control of Ukraine’s
rebel zones.

Vladimir Putin is seizing on mixed
signals from the U.S. to quietly tighten
Russia’s grip on two rebel regions of
Ukraine, burying hopes for a
European-brokered peace deal and
relief from sanctions anytime soon.

While the Kremlin continues to
publicly back the accord that
Germany and France oversaw in
2015

Putin’s real strategy in Ukraine is to
fully separate the two border areas
known as the Donbas through
incremental integration with Russia,
three people close to the leadership in
Moscow said.

He has no plans to recognize or
annex the territories, they said.

While these actions may play well in
Russia as nationalistic they will not
help relieve sanctions or help the
ruble.

Thus the Russian currency is another
to be careful of in the emerging
markets.

Be Careful of Emerging Market Currencies

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