IT disruption driving up Asia EM currencies - AmpGFX
Investors are pursuing gains in equity markets; in particular, EM markets that are big exporters of IT goods, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.
“These capital flows are tending to drive currencies; Asian EM currencies are out-performing other EM regions. The USD is tending to weaken as the US growth outlook is moderate and no more special than other economies. The Fed may be raising rates faster than other countries, but not so fast to upset domestic or global growth expectations. Commodity currencies are under-performing. There appears to be excess supply of commodities, and while some commodity prices have strengthened this year, performance has been mixed. Chinese construction demand may be slowing, weakening demand for steel-making commodities.”
“Yield curve flattening may reflect good disinflation trends related to technological disruption and globalization that support global asset markets; albeit with winners and losers along the lines of disruption. Comprehensive US tax reform may upset recent trends of a softer USD and strong EM markets. GBP has firmed this week despite evidence that its economy is suffering from Brexit uncertainty, UK government instability, and growing time pressure on Brexit negotiations. The AUD/USD 2yr swap spread is close to flipping into negative territory for the first time since 2001.”