1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules
2) The HKMA acted to defend the HKD peg for the first time since December 2012
3) The won continues to strength despite more North Korea threats and official pushback BOK
4) The news out of South Africa remains bad on the labor front
5) Violence is escalating again in Ukraine as the cease-fire breaks down
6) Argentina has missed a payment on restructured bonds coming due Monday June 30
Over the last week, Argentina (+4.3%), India (+3.0%), and Russia (+2.7%) have outperformed in the EM equity space in local currency terms, while Turkey (-1.8%), Poland (-1.6%), and Czech Republic (-1.3%) have underperformed. To put this in better context, MSCI EM was +1.1% over the past week.
In the EM local currency bond space, Sri Lanka (10-year yield -32 bp), Indonesia (-15 bp), and Korea (-10 bp) have outperformed over the last week, while Brazil (10-year yield +23 bp), Mexico (+15 bp), and Hungary (+14 bp) have underperformed. To put this in better context, the 10-year UST yield was +14 bp over the past week.
In the EM FX space, IDR (+1.5% vs. USD), COP (+1.4%), and KRW (+0.8%) have outperformed over the last week, while RUB (-1.9% vs. USD), ZAR (-1.6%), and BRL (-1.6%) have underperformed.
1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules. The new rules will allow commercial banks to set their own rates for non-bank clients (such as retail), instead of having to follow a set of pre-established directive. This should not change anything regarding the CNY fixing.
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