We doubt the rebound in EM currencies will last

We think that the recent rebound in emerging market (EM) currencies will be short-lived, and that most will fall further against the US dollar this year.
Jonathan Petersen Markets Economist
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Payrolls and the flattening Treasury yield curve

The ostensibly disappointing November US Employment Report released today has not dented expectations for near-term monetary tightening in the US at all, perhaps because of the growing signs this week that Fed officials have become more concerned about inflation. If policymakers are indeed determined to press ahead with tightening next year, even as the recoveries in the economy and labour market potentially slow, we could well see the Treasury yield curve flatten further.

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FX Markets Focus

Our approach to currency valuation

This Focus provides an overview of the concepts and models underpinning our new FX Markets Valuations Monitor. It is split into three sections. The first explains our framework for thinking about currency valuations. The second provides details on the key concepts and models we use to estimate “equilibrium” exchange rates. The third describes how we apply these tools in our analysis of currencies, and how best to interpret the outputs from our suite of models.

20 August 2021

FX Markets Weekly Wrap

Dollar rally takes a breather as US Treasury yields stall

The US dollar looks set to end the week little changed against most currencies, as US inflation data – this week’s main data release – failed to push up the currency further. Next week, the minutes of the Fed’s July meeting may shed more light on policymakers’ latest thinking, and we expect the RBNZ will be the first among developed market central banks to raise rates with a 50bp hike, more than the 25bp hike that is widely anticipated.

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FX Markets Update

We expect rising UST yields to extend the dollar’s rally

We expect further rises in US Treasury yields to support continued gains in the US dollar against most other developed market (DM) currencies, especially the yen and the Swiss franc.

13 August 2021
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