Post on 20-Apr-2018
transcript
FX talkING January 2018
1
FX talkING In EUR we trust
An early January sell-off in core bond markets has yet to do much damage to
core trends in FX markets – namely those of seeking out and investing in growth
opportunities outside of the US. The mid-cycle story of strong growth and benign
inflation trends overseas will keep equities supported and the dollar pressured.
EUR/USD continues to perform well and the story here is of timing the next leg higher.
We prefer March for the rally – once the Italian political scene becomes clearer and
when the ECB considers withdrawing the threat of further QE. This cross seems relatively
immune to an orderly rise in US rates. The EUR also stacks up as a safe-haven currency
should President Trump choose to pursue greater protectionism later this month.
The broad decline in USD/Asia is especially worth highlighting. One interpretation of the
PBOC’s decision to liberalise the CNY fixing is of a PBOC confident that the dollar is going
to decline. We see certain parallels now with the broad decline in USD/ASIA 2005-2007.
Growing Asia FX reserves could also be re-cycled into the EUR – a key factor at the time.
In Europe, a few currencies may out-pace EUR strength (SEK, CZK), but most should be
carried along for the ride against the softer dollar. Of the EMEA high yielders, RUB and
perhaps TRY would be our preference here, but too little risk is now priced into ZAR.
The commodity rally is helping LATAM currencies in general. Yet political pitfalls certainly
lie ahead in both Brazil and Mexico. We would not chase rallies here.
ING FX forecasts
EUR/USD USD/JPY GBP/USD
1M 1.20 113 1.36
3M 1.23 113 1.40
6M 1.25 111 1.42
12M 1.30 110 1.53
EUR/GBP EUR/CZK EUR/PLN
1M 0.88 25.40 4.18
3M 0.88 25.20 4.15
6M 0.88 25.00 4.14
12M 0.85 24.80 4.12
USD/CNY USD/MXN USD/BRL
1M 6.45 19.30 3.25
3M 6.40 19.60 3.30
6M 6.35 20.50 3.45
12M 6.30 18.80 3.25
> / = / < indicates our forecast for the currency pair is above/in line with/below the corresponding market forward
or NDF outright
Source: Bloomberg, ING
FX performance
EUR/USD USD/JPY EUR/GBP EUR/NOK NZD/USD USD/CAD
%MoM 2.8 -1.5 0.7 -1.6 4.7 -2.3
%YoY 14.6 -3.7 1.8 6.6 2.8 -5.1
USD/UAH USD/KZT USD/BRL USD/ARS USD/CNY USD/TRY
%MoM 4.6 -1.5 -2.3 7.9 -2.2 -2.6
%YoY 4.8 -0.9 0.5 18.0 -6.5 -0.9
Source: Bloomberg, ING
Chris Turner Head of Foreign Exchange Strategy
London +44 20 7767 1610
chris.turner@ing.com
Petr Krpata, CFA Chief EMEA FX and IR Strategist
London +44 20 7767 6561
petr.krpata@ing.com
Viraj Patel Foreign Exchange Strategy
London +44 20 7767 6405
viraj.patel@ing.com
View all our research on Bloomberg at
ING5<GO>
USD/Majors (30 Jan 09=100)
Source: Reuters, ING
USD/EM (30 Jan 09=100)
Source: Reuters, ING
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$/TRY
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StrongerEM FX
FX Strategy
Economic & Financial Analysis
12 January 2018
FX
ING.com/THINK
FX talkING January 2018
2
Developed markets
EUR/USD
Staying strong Current spot: 1.21
EUR/USD continues to hold up well despite the rise in US rates. A
25bp Fed hike in March is 80% priced now. We have a slight
preference for June given core inflation remains below 2% and
the change of Fed Chair in February. A faster rise in inflation
would see us favour March. Thereafter we favour 2 more hikes.
Minutes of the December ECB meeting also suggest there could
be room for movement in ECB language after all. A withdrawal of
the threat to increase QE could be seen in March – as could a safe
outcome to Italian elections on 4 March.
Bear trend in $/Asia re-introduces EUR demand from Asian CBs.
Intervention to buy USD is re-cycled into EUR, similar to 2005-07. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 1.20 (1.216) 3M 1.23 (1.2211.23) 6M 1.25 (1.229) 12M 1.30 (1.246)
Chris Turner, London +44 20 7767 1610
USD/JPY
Trump’s playground Current spot: 111.40
Our team have had a good call with the rise in US Treasury yields
– but $/JPY has struggled to rally. One of the stories in early
January has been the BoJ’s decision to slow purchases of longer-
dated JGBs. We prefer to see this as a decision to try and steepen
the JGB curve for the local asset management industry rather
than a pre-emptive BoJ move to normalise policy. The latter may
not be a story until October 18, if at all.
Instead it seems that Trump’s threat to impose broad-based
sanctions on China (we may hear more of this end Jan at
Davos/State of Union) may be playing a role here.
At present, we’re sticking to a 110-115 range, with downside risks Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 113.00 (111.2) 3M 113.00 (110.8) 6M 111.00 (110.2) 12M 110.00 (108.8)
Chris Turner, London +44 20 7767 1610
GBP/USD
Conviction call for a rally to 1.40 in 1Q18 on Brexit progress Current spot: 1.37
‘Less Noise, More Poise’ is our GBP 2018 motto and its resilience in
recent weeks somewhat encapsulates this sentiment. We see 2
factors dictating the pound’s narrative in the short-term: (1) UK
politics and (2) the Bank of England’s policy path.
On the first, we believe noise around a fragile Tory government
may act as a limiting factor for the currency – but note that the
bar to actively sell GBP on UK politics is high. While speculative
investors have turned net long in recent months, this adjustment
in positioning has been mainly driven by GBP shorts bailing.
Our conviction call is for GBP/USD to rally to 1.40 in 1Q18 on an
agreed Brexit transition deal and hawkish BoE policy re-pricing. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 1.36 (1.37) 3M 1.40 (1.37) 6M 1.42 (1.38) 12M 1.53 (1.39)
Viraj Patel, London +44 20 7767 6405
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
70
80
90
100
110
120
130
70
80
90
100
110
120
130
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
FX talkING January 2018
3
EUR/JPY
The ‘Trump put’ on equity markets keeps downside limited Current spot: 135.3
90
110
130
150
90
110
130
150
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
EUR/JPY is making slow, but steady progress to the upside. Seen
as a key proxy for equity risk, EUR/JPY will suffer occasional
wobbles. Yet we think it is too early to call a top in equities – after
all we’ve only just entered a bear market in bonds – a bear
market in equities may not follow for a year or two.
President Trump also has a keen interest in keeping equities
elevated – as a testament to his successful Presidency. We doubt
he would pursue a protectionist agenda aggressively enough
were it to start dragging US equity markets lower.
We’ve been positive on EUR/JPY for a long time now – and expect
further gains, most likely in March, led by a stronger EUR. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 137.00 (135) 3M 138.00 (135) 6M 141.00 (135) 12M 143.00 (136)
Chris Turner, London +44 20 7767 1610
EUR/GBP
EUR/GBP stability is the name of the game for 2018 Current spot: 0.89
Progress during Phase II of Brexit negotiations – and subsequent
clarity over the UK’s new macroeconomic and trading paradigm –
will be the overarching theme dominating EUR/GBP’s direction of
travel in 2018. Despite a long, tricky road – we expect eventual
progress and steps towards a mutual agreement will see some of
GBP’s long-run Brexit risk premium priced out (EUR/GBP to 0.85).
Ahead of this, much of the year will be spent with two cyclical
forces – in the form of a positive Eurozone economic story and
less pessimistic UK economic story – offsetting each other. This
points to range-bound price action in the broad 0.85-0.90 range.
Risks skewed to a move below 0.85 on the back of a ‘softer’ Brexit. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 0.88 (0.89) 3M 0.88 (0.89) 6M 0.88 (0.89) 12M 0.85 (0.90)
Viraj Patel, London +44 20 7767 6405
EUR/CHF
Wind at the SNB’s back Current spot: 1.18
The SNB are welcoming the depreciation in the CHF and continue
to describe it as ‘highly valued’. Super-loose SNB monetary policy
looks to remain in place all year – where the SNB can always
point to low inflation (CPI forecast at 0.8% YoY end-2018) to
justify their actions. At the same time, Swiss growth at 2% should
continue to underperform that of the Eurozone. Wider rate
spreads and a higher EUR/CHF is certainly part of the game-plan.
Italian elections on 4 March could help determine EUR/CHF
direction this summer. We only attach a 5-10% chance to a clean
negative EUR outcome. More likely is a neutral grand coalition.
ECB normalisation discussion this summer the catalyst for 1.25. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 1.18 (1.18) 3M 1.20 (1.18) 6M 1.22 (1.18) 12M 1.25 (1.18)
Chris Turner, London +44 20 7767 1610
0.65
0.70
0.75
0.80
0.85
0.90
0.95
0.65
0.70
0.75
0.80
0.85
0.90
0.95
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
FX talkING January 2018
4
EUR/NOK
The pace of NOK gains to slow as oil is hitting US$70/bbl Current spot: 9.66
7.0
7.5
8.0
8.5
9.0
9.5
10.0
7.0
7.5
8.0
8.5
9.0
9.5
10.0
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The ongoing rise in oil prices is benefiting NOK both via the
improved economic and monetary policy channels.
The Norges Bank already brought the timing of the first expected
rate hike forward to 1Q19. Should oil prices stay elevated, the NB
may bring the hike into 4Q18. Yet, we see this as a risk given our
commodity’s team base case of stabilising / somewhat declining
oil prices. It suggests the pace of NOK gains should slow, with the
100-day MA of EUR/NOK 9.55 acting as a strong support.
The positive effect on NOK from higher prices and the less dovish
NB is further exaggerated by the cheap krone valuation (11%
cheap against EUR based on our medium-term BEER model). Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 9.65 (9.67) 3M 9.60 (9.69) 6M 9.50 (9.72) 12M 9.40 (9.79)
Petr Krpata, London +44 20 7767 6561
EUR/SEK
Front-loaded SEK strength under way Current spot: 9.84
8.0
8.5
9.0
9.5
10.0
10.5
8.0
8.5
9.0
9.5
10.0
10.5
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
We look for the 1Q18 frontloaded SEK strength to continue and
EUR/SEK to move lower, potentially towards 9.60. The Stibor
market has already normalised, the Riksbank is modestly less
dovish than market feared and the concerns about the housing
market are easing too (following the better-than-expected data).
However, given that the Riksbank is unlikely to materially and
aggressively front-run the ECB, we don’t expect the current
theme of the market re-pricing the Riksbank outlook to last. This
suggests the SEK upside should stall from 2Q18 onwards (due in
part to the Riksbank’s unwillingness to induce overly strong SEK).
We thus expect EUR/SEK to flat line after the 1Q18 decline,
trading around 9.50-9.60 levels for the remainder of the year. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 9.60 (9.84) 3M 9.50 (9.83) 6M 9.50 (9.83) 12M 9.50 (9.84)
Petr Krpata, London +44 20 7767 6561
EUR/DKK
The DN likely to be happy with the gradual DKK weakness Current spot: 7.450
7.42
7.43
7.44
7.45
7.46
7.47
7.48
7.42
7.43
7.44
7.45
7.46
7.47
7.48
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
EUR/DKK is pushing higher, reaching the highest level since May
2017 as EUR continues strengthening (induced by a mix of ECB
Minutes and the tentative progress on German coalition talks).
With the EUR/DKK (currently at 7.4485) still below the central rate
of 7.46038, there is no need for the DN to react. In fact, the
central bank is likely to welcome the move higher. However we
see a risk of EUR/DKK moving back to 7.4400 in coming weeks
ahead of the March Italian elections.
The DN is likely to keep its depo rate in deeply negative territory
and only start normalising its policy once the ECB embarks on
depo rate hikes. This should be only a story for 2018. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 7.44 (7.449) 3M 7.45 (7.447) 6M 7.45 (7.444) 12M 7.46 (7.440)
Petr Krpata, London +44 20 7767 6561
FX talkING January 2018
5
USD/CAD
NAFTA risks a sting in the tail to a bullish CAD story Current spot: 1.251
0.90
1.00
1.10
1.20
1.30
1.40
1.50
0.90
1.00
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1.20
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1.40
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Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
CAD has been on fine form of late – not least due to external
factors such as the resilience in oil prices (including a rebound in
Western Canada Select crude) and a benign global environment
that has favoured high-beta currencies. Canadian macro data
has also been promising over the past month – with a sharp pick-
up in core CPI and healthy jobs numbers making the case for a
BoC rate hike in the upcoming 17 January meeting highly likely.
NAFTA noise – and growing risks of a break-up (albeit not ING’s
base case) – is the only headwind for the CAD in the near-term.
The fallout for CAD would be significant if we saw a NAFTA break-
up. In this tail-risk scenario, USD/CAD could move higher to 1.30. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 1.24 (1.25) 3M 1.24 (1.25) 6M 1.22 (1.25) 12M 1.19 (1.25)
Viraj Patel, London +44 20 7767 6405
AUD/USD
AUD support from rising iron ore prices may fade in 1Q18 Current spot: 0.79
0.60
0.70
0.80
0.90
1.00
1.10
0.60
0.70
0.80
0.90
1.00
1.10
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
With the USD trading under new rules – and in an environment
where rising US yields do not necessarily have to weigh on carry
currencies – AUD/USD has marched higher. On reflection, we may
have overestimated the channel via which higher long-dated US
yields could weigh on AUD/USD. Our 1M forecast is now 0.78.
The strong start to the year for industrial metals has also helped
the AUD to rally. Our commodities team believe the rally in the
iron ore looks overdone – and expect a decline to US$55/tonne in
2Q18. This could weigh on AUD sentiment (more on the crosses).
Still, with the Australian economy stuck in ‘lowflation’ mode – we
expect the RBA to be one of the last of the G10 central banks to
hike. This should limit the degree of AUD upside over 2018. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 0.78 (0.789) 3M 0.78 (0.788) 6M 0.80 (0.789) 12M 0.85 (0.789)
Viraj Patel, London +44 20 7767 6405
NZD/USD
Benign risk backdrop + positive local story = stronger NZD Current spot: 0.72
0.60
0.70
0.80
0.90
0.60
0.70
0.80
0.90
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
While a weak $ environment partly explains the extensive rally in
NZD/USD beyond 0.72, one cannot neglect the positive local story
that is starting to transpire. Lower political/policy risks, resilience
in the New Zealand economy and signs of a bottoming out in
dairy prices – all spell good news for the kiwi in the near term.
Though the policy uncertainty of a Labour-NZ First coalition led to
a NZD sell-off in 2017, the currency has since stabilised as we had
expected – with the dust settling on the new government. Also,
the appointment of a new RBNZ governor – the well-respected
Adrian Orr – has taken a large chunk of uncertainty off the table.
We revise our 1M and 3M forecasts for NZD/USD to 0.72 and 0.74. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 0.72 (0.723) 3M 0.74 (0.723) 6M 0.76 (0.723) 12M 0.78 (0.722)
Viraj Patel, London +44 20 7767 6405
FX talkING January 2018
6
Emerging markets
EUR/PLN
Strong GDP and dovish MPC, but MinFin helped PLN Current spot: 4.17
3.75
4.00
4.25
4.50
4.75
3.75
4.00
4.25
4.50
4.75
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
EUR/PLN fell to 4.15, pushed by the MoF converting EU funds on the
market in 4Q17 and higher €/US$ recently. The short-term outlook
for the zloty is mixed. PLN is close to overvalued vs EUR according to
our s-t model, positioning is already high in PLN and MPC extended
its dovish forward guidance - we moved first hike to 2019 instead of
4Q18. EUR/PLN is seen back closer to 4.20 in coming weeks.
Appreciation of the PLN is expected to resume later in 1Q18,
reflecting the strong domestic macro story. Risks stemming from
the stand-off against the EU are mostly long term (negotiation of
the next EU budget), so are out of scope for now. All-in-all
EUR/PLN is expected to remain below 4.20 in 2018 on average. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 4.18 (4.18) 3M 4.15 (4.19) 6M 4.14 (4.21) 12M 4.12 (4.26)
Rafal Benecki, Warsaw +48 22 820 4696
EUR/HUF
Déja vu all over again with EUR/HUF around 310 Current spot: 308.6
250
270
290
310
330
250
270
290
310
330
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
We expect HUF to trade on the soft side going into the first NBH
IRS tenders and the start of the mortgage bond QE in January.
Yet, the experience of 2H16 and 2017 (when NBH pushed HUF2tr
out of the 3-m depo facility) suggests that the new excess
liquidity does not tend to weigh on HUF meaningfully.
The above suggests limited HUF weakness, with EUR/HUF likely
trading around 310 over the coming weeks/months.
Thereafter, look for a back-loaded HUF strength in 2H18 once (a)
we pass the April Parliamentary elections; (b) the mortgage bond
QE programme will be nearing the end. Expect EUR/HUF to start
testing the 300 level in late 2018. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 310.00 (308.7) 3M 310.00 (308.8) 6M 304.00 (309.2) 12M 298.00 (309.7)
Petr Krpata, London +44 20 7767 6561, Péter Virovácz, Budapest +36 1 235 8757
EUR/CZK
Stronger CZK still, yet a slower pace of appreciation Current spot: 25.52
23
24
25
26
27
28
29
23
24
25
26
27
28
29
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The CNB decided not to distort the Christmas festive period and
kept rates on hold in December. However, Governor Rusnok
indicated that a gradual tightening is still ahead. We expect a
rate hike in February during the Inflation Report meeting.
Despite slightly weaker inflation in December (2.4% YoY), we look
for a gradual hiking cycle in coming quarters due to favourable
economic conditions and accelerating wages (ie, 3-4 hikes).
As the market is pricing almost three full 25bp hikes this year and
80% prob of a Feb hike, the pace of CZK appreciation should slow.
Yet still, EUR/CZK is to break 25.00 this year. With EUR/USD
expected to strengthen, USD/CZK is to move very close to 19.00. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 25.40 (25.53) 3M 25.20 (25.54) 6M 25.00 (25.58) 12M 24.80 (25.62)
Petr Krpata, London +44 20 7767 6561, Jakub Seidler, Prague +420 257 474 432
FX talkING January 2018
7
EUR/RON
The NBR keeps talking down the RON with limited success Current spot: 4.64
4.00
4.20
4.40
4.60
4.80
4.00
4.20
4.40
4.60
4.80
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
After the last meeting, the governor was quite ambiguous and, if
anything, he suggested a slight preference for mild RON
weakness if needed. He argued that the moderate RON
depreciation over the past few years has been positive for the
economy, avoiding a deeper correction. He also emphasised a
general low volatility FX regime. On the other hand, the governor
mentioned that an interest rate differential is ‘in favour of the
RON’ would last and it already helped preserve RON stability.
The NBR governor was dovish, saying that mopping up liquidity at
the 1.00% deposit facility looks ‘sufficient’ right now. The NBR is
trying to balance between higher key rates to keep inflation
expectations anchored and lower transmission of the hikes into
the cost of credit to mitigate the likely political/public pressures.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 4.65 (4.64) 3M 4.68 (4.66) 6M 4.70 (4.70) 12M 4.67 (4.79)
Ciprian Dascalu, Bucharest +40 31 406 89 90
EUR/HRK
CNB steps in to curb HRK firming, achieves stabilisation Current spot: 7.43
7.10
7.20
7.30
7.40
7.50
7.60
7.70
7.80
7.10
7.20
7.30
7.40
7.50
7.60
7.70
7.80
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The CNB intervened on 4-January buying EUR405.5m at an
average rate of 7.453515 in order to curb HRK firming due to a
large flow. The amount is large by local market standards. Hence,
this led to a stabilisation of the exchange rate.
Croatia has recently elaborated an extensive strategy for
adopting the euro, setting 2020 as a target for ERM-II entry. The
document seems to suggest that the government is comfortable
with the average exchange rate for EURHRK since 2001 of 7.45 as
a likely central parity rate. While this could help concentrate
efforts in reducing the debt to GDP levels, we doubt the country
will manage to meet the 60% debt-to-GDP ratio in three years
from around 83% currently. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 7.45 (7.45) 3M 7.40 (7.46) 6M 7.30 (7.48) 12M 7.40 (7.53)
Ciprian Dascalu, Bucharest +40 31 406 89 90
EUR/RSD
Heavy two-way management by NBS in tight range Current spot: 118.4
90
100
110
120
130
90
100
110
120
130
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The NBS tightened its grip on the FX, ignoring IMF
recommendations, as suggested by the increase in frequency of
FX intervention and lower EUR/RSD volatility. The central bank
dismissed a change to a managed floating exchange rate regime.
In its pursuit of Dinarization of the economy, the central bank
recently allowed higher exchange rate flexibility, with RSD firming
and expectations of further appreciation acting as incentives for
deposit Dinarization. The country aims to become an EU member
by 2020, with the Kosovo issue being the only material obstacle -
though it seems that there is strong political will for a
compromise. The RSD benefits from improving external balances
and public finances and we expect the central bank to allow
gradual and steady RSD appreciation.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 119.00 (120.1) 3M 119.00 (121.1) 6M 118.00 (122.5) 12M 117.00 (123.9)
Ciprian Dascalu, Bucharest +40 31 406 89 90
FX talkING January 2018
8
USD/RUB
Starting 2018 on a strong footing despite fears Current spot: 56.55
25.0
35.0
45.0
55.0
65.0
75.0
85.0
25.0
35.0
45.0
55.0
65.0
75.0
85.0
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
The RUB gained 5% vs USD in 2017 on rising oil prices and steady
risk appetite from investors reflecting its strong fundamentals. The
New Year starts at 56.5-57/USD. MinFin FX buying & the sanctions
risk versus a positive C/A seasonality story will drive RUB in 1Q.
The nearly US$70/bbl Brent price will be an extra positive for C/A
surplus in 1Q, which will more than cover the expected increase
in MinFin FX buying under the adjusted approach of calculating
the extra oil & gas revenues. These will provide a cushion against
the slightly higher than usual external debt payments.
The US sanctions risk remains on the table, even though we still
don’t have this in our base-case scenario. Fears of sanctions may
still limit RUB gains, but there are clearly upside risks to our RUB
projections assuming some marginal weakness in 1Q18.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 57.50 (56.79) 3M 59.40 (57.22) 6M 58.60 (57.89) 12M 58.00 (59.08)
Dmitry Polevoy, Russia +7 495 771 7994
USD/UAH
Facing the same risks as in 2017 Current spot: 28.55
7.0
12.0
17.0
22.0
27.0
32.0
7.0
12.0
17.0
22.0
27.0
32.0
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
28.55/USD vs around 27/USD in early 2017. The UAH has been
punished for the gov’t delays with the key IMF-required reforms,
which has forced external donors to pause further tranches.
These latter factors remain on the table as we move into 2018
with the anti-corruption court, pension reforms and IMF-
compliant fiscal budget and energy tariffs staying as key boxes
needing to be ticked in the near future. The longer the gov’t fails
to succeed, the higher could be investors’/official lenders’
concerns about commitments to the IMF programme and thus
sovereign financial stability.
2018 will be a pre-election year adding risks of populism and
further headwinds to the reform implementation. The UAH pace
fits well with our view of a gradual weakness and risks remain.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 28.50 (28.81) 3M 28.00 (29.28) 6M 29.00 (29.98) 12M 30.00 (31.37)
Dmitry Polevoy, Russia +7 495 771 7994
USD/KZT
It has been stable over 2017, but has upside in 2018 Current spot: 329.6
140
180
220
260
300
340
380
420
140
180
220
260
300
340
380
420
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18
ING f'cast Mkt NDF
In 2017, the KZT was nearly flat vs USD near 332.3, but lost 12%
vs EUR. The resilience to oil price gains and RUB strengthening
mostly stem from local factors: some re-ignition of devaluation
fears from mid-2017, incl. due to the extension of the sanctions
against Russia, which remains the key trade/economic partner.
KZT fundamentals will remain strong in 2018: GDP growth is seen
near 3%, inflation will likely slowdown closer to 5%, the NBK said
it would keep the real policy rate vs 12M-ahead CPI not above 4%
and the fiscal gap will normalize after a rise in 2017.
The key event recently has been the freezing of US$22bn from
the National Oil Fund to cover the around US$500mn claims to
the Kazakh gov’t. Despite the lawsuit to last over 2018, we see no
risks to the gov’t position, so KZT will likely preserve its appeal.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 330.00 (331.2) 3M 325.00 (333.3) 6M 320.00 (337.2) 12M 310.00 (347.7)
Dmitry Polevoy, Russia +7 495 771 7994
FX talkING January 2018
9
USD/TRY
Inflation to retreat in early 2018 Current spot: 3.75
1.3
1.6
1.9
2.2
2.5
2.8
3.1
3.4
3.7
4.0
4.3
1.3
1.6
1.9
2.2
2.5
2.8
3.1
3.4
3.7
4.0
4.3
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
In the coming months, easing base effects will continue to
contribute to the recovery in the inflation outlook. However the
magnitude of the fall will likely be shorter and shallower than
envisaged earlier, while concerns about the quality of disinflation
will remain as evidenced by the core at a new peak in the current
inflation series. Given this backdrop along with the 24-month
ahead inflation expectations at the highest since early 2006, the
CBT policy response will remain key for the markets.
Despite sticky core inflation, expected disinflation in the headline
and significant carry should support TRY in the near term.
However, given structural problems that weigh on TRY in the
medium term, bouts of pressure will likely continue. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 3.75 (3.79) 3M 3.85 (3.85) 6M 3.85 (3.96) 12M 4.15 (4.18)
Muhammet Mercan, Istanbul +90 212 329 0751
USD/ZAR
Too hot to handle Current spot: 12.45
6
8
10
12
14
16
18
6
8
10
12
14
16
18
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The ZAR is holding onto the sensational gains witnessed in
December, when Ramaphosa won the bid for the ANC presidency
– sparking speculation of an early exit for President Zuma. At
present, the market seems to be pricing in all the good news –
including perhaps the early departure of Zuma. However, S. Africa
stills faces a potential Moody’s downgrade in February, which
could expel S. African bonds from key indices, such as the WGBI.
In macro terms, growth is expected to remain sluggish near 1.5%
and inflation to bottom out near 4.5% in 1Q18 before trending
higher again. The window for the SARB to cut looks very limited.
We think there is too little risk premium priced into the ZAR. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 12.75 (12.51) 3M 13.25 (12.62) 6M 13.50 (12.79) 12M 13.50 (13.10)
Chris Turner, London +44 20 7767 1610
USD/ILS
Carry on intervening Current spot: 3.40
3.2
3.5
3.8
4.1
3.2
3.5
3.8
4.1
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
USD/ILS has already hit our end 2018 target of 3.40 and we doubt
this trend needs to reverse. Unsurprisingly the interventionist BoI
has been active, buying $100mn in December and buying ‘large
amounts’ according to the CB governor in January. However, we
only expect the BoI to slow, not reverse this trend. One reason is
that the ILS effective exchange rate is only 5% stronger on the
year – far less than the 11% strength in ILS vs USD.
We doubt the BoI will/can cut rates to deter ILS strength. The
economy is near full employment, GDP should remain steady at
3.5% & the government has just passed an expansionary budget.
Keep watch of what ILS strength does to the CPI trend. Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 3.40 (3.40) 3M 3.35 (3.39) 6M 3.30 (3.37) 12M 3.25 (3.34)
Chris Turner, London +44 20 7767 1610
FX talkING January 2018
10
LATAM
USD/BRL
Social security reform and Lula in the spotlight Current spot: 3.21
1.4
1.8
2.2
2.6
3.0
3.4
3.8
4.2
4.6
1.4
1.8
2.2
2.6
3.0
3.4
3.8
4.2
4.6
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
External accounts, inflation and activity data remain broadly BRL-
supportive but the outlook for the BRL is biased towards
weakness this year, weighed down by the uncertain outlook for
fiscal consolidation and for presidential elections in October.
On the fiscal front, failure to approve a social security reform next
month, along with the debate over potential changes to the fiscal
framework (the “golden rule”), could trigger further downgrades,
beyond S&P’s move this week (cut to BB-).
On the electoral front, near-term catalysts include the court-
ruling regarding former President Lula’s ability to run in this
year’s election (January 24). The release of election polls should
generate more volatility closer to the ballot, after April. Source: Bloomberg, ING
ING forecasts (NDF) 1M 3.25 (3.23) 3M 3.30 (3.25) 6M 3.45 (3.28) 12M 3.25 (3.35)
Gustavo Rangel, New York +1 646 424 6464
USD/MXN
NAFTA-related headline risk keeps volatility high Current spot: 19.05
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
NAFTA concerns should continue to drive near-term MXN trends,
with material headline risk surrounding the 6th round of
negotiations (Jan 23-28) in Montreal. This round is critical to
determine whether the parties can move past the considerable
differences that became evident in the 4th-round. Failure to
advance could push the US to issue a notice of withdraw from the
treaty, with a break-up then becoming the base-case scenario.
FX intervention was used to limit FX weakness but Banxico’s
ammunition is insufficient, relative to the size of the market, to
alter medium-term FX dynamics. Banxico should match market
expectations and extend rate hikes in February and April.
Presidential elections (July 2018) should also lend a weakening
bias to the MXN, with left-leaning contender ahead in the polls.
Source: Bloomberg, ING
ING forecasts (mkt fwd) 1M 19.30 (19.16) 3M 19.60 (19.35) 6M 20.50 (19.66) 12M 18.80 (20.26)
Gustavo Rangel, New York +1 646 424 6464
USD/CLP
CLP continues to lead, buoyed by copper Current spot: 603.76
400
450
500
550
600
650
700
750
400
450
500
550
600
650
700
750
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
The CLP continues to stand out as the best-performing currency
in LATAM over the past few months, buoyed by the rally in
copper prices, which could extend into the new year.
Optimism with the election of Sebastian Piñera and confirmation
that a recovery in economic activity is clearly under way have
also contributed to enhance investor interest in CLP assets.
Further gains or, at least, still supportive copper prices this year
could also push CLP toward fresh highs, amid robust trade flows.
Inflation remains below the target but it has bottomed out and
re-entered the targeted range, which should help reduce the risk
that BCCh will re-launch the rate-cutting cycle. Source: Bloomberg, ING
ING forecasts (NDF) 1M 610.00 (604) 3M 615.00 (605) 6M 620.00 (606) 12M 600.00 (638)
Gustavo Rangel, New York +1 646 424 6464
FX talkING January 2018
11
USD/COP
COP catches-up to oil amid broad USD-weakness Current spot: 2859.85
1600
2000
2400
2800
3200
3600
1600
2000
2400
2800
3200
3600
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt Fwds
The COP outperformed in recent weeks, reacting to the weaker
USD and, finally, catching up to the rally in oil prices.
Broad COP fundamentals remain fragile however, as illustrated
by the recent S&P credit rating downgrade. External accounts are
improving very gradually but the chief concern is the fiscal
outlook, which remains uncertain. Commitment to the fiscal rule
will continue to be tested, given lower-than-expected growth and
the upcoming presidential election (May), implying a continued
risk of a downgrade by other credit agencies.
BanRep opted for caution when it paused the easing cycle in
December but additional cuts are likely amid disappointing
economic activity indicators and the gradual decline in inflation. Source: Bloomberg, ING
ING forecasts (NDF) 1M 2850.00 (2866) 3M 2870.00 (2879) 6M 2950.00 (2899) 12M 2900.00 (2934)
Gustavo Rangel, New York +1 646 424 6464
USD/PEN
Solid fundamentals but limited room for near-term gains Current spot: 3.22
2.4
2.6
2.8
3.0
3.2
3.4
3.6
2.4
2.6
2.8
3.0
3.2
3.4
3.6
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
The PEN was largely stable over the past month,
underperforming its regional peers amid the rally, as usual.
Peru’s BCRP cut the policy rate four times last year, from 4.25%
to 3.25%, and started off the year with another cut following the
collapse in inflation seen in 4Q (from 2.9% YoY to 1.4% in
December), and renewed concerns about the activity outlook
amid heightened political uncertainty. Further disinflation should
result in at least one more rate cut, to 2.75%, during 1Q.
Despite the (Odebrecht-related) disappointment with GDP
growth, Peru’s fundamentals stand out, thanks to superior
external flows and fiscal sustainability metrics. The PEN broke
through the 3.23 barrier, and should test 3.21 now. Source: Bloomberg, ING
ING forecasts (NDF) 1M 3.21 (3.22) 3M 3.21 (3.24) 6M 3.20 (3.26) 12M 3.19 (3.30)
Gustavo Rangel, New York +1 646 424 6464
USD/ARS
Monetary policy changes cloud the horizon Current spot: 18.73
3.0
5.0
7.0
9.0
11.0
13.0
15.0
17.0
19.0
21.0
23.0
3.0
5.0
7.0
9.0
11.0
13.0
15.0
17.0
19.0
21.0
23.0
Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ING f'cast Mkt NDF
The administration’s decision to relax the inflation targets for
2018-19 took investors by surprise and damaged investor
credibility in Argentina’s new inflation-targeting regime.
Fears that the change would trigger excessive rate cuts have
been mitigated by BCRA’s decision to cut the benchmark rate by
less than expected by the market, 75bp vs 100-200. The cautious
guidance was welcomed but upcoming policy decisions will be
carefully monitored, especially after the high December CPI.
Argentina remain highly dependent on FX financing flows. To
maintain investor confidence and limit further FX weakness it
must deliver on the fiscal front and address market concerns
regarding BCRA’s autonomy to conduct monetary policy. Source: Bloomberg, ING
ING forecasts (NDF) 1M 18.70 (19.08) 3M 18.70 (19.66) 6M 19.00 (20.59) 12M 19.95 (22.34)
Gustavo Rangel, New York +1 646 424 6464
FX talkING January 2018
12
Asia
USD/CNY
Yuan strengthening to continue with weaker dollar Current spot: 6.4836
CNY appreciated over 6.5% in 2017 against the USD.
We believe the CNY will continue to strengthen because the
government is still concerned about capital outflows. The
National Council has issued detailed guidelines for outward
corporate investments. For individuals, the regulator caps the
annual overseas ATM withdrawal at CNY 100,000.
The media reported on the central bank setting the counter-
cyclical factor to zero in the daily CNY fixing mechanism. If this is
true it is a move of returning to liberalisation of the exchange
rate mechanism. The currency would face higher volatility from
both internal and external factors. We expect the USDCNY to
appreciate to 6.30 by the end of 2018. Source: Bloomberg, ING
ING forecasts (FWDs) 1M 6.4500 (6.4992) 3M 6.4000 (6.5161) 6M 6.3500 (6.5410) 12M 6.3000 (6.5843)
Iris Pang, Hong Kong +852 2848 8071
USD/HKD
The lower HIBOR triggers possible wiping out liquidity Current spot: 7.8232
HIBOR has come down since the beginning of the year. The
divergence of LIBOR and HIBOR signals ample liquidity, leading
the market to think about whether the HKMA will again exercise
its liquidity mop anytime soon.
We are thinking the same too. Hong Kong’s economy is syncing
more with Mainland China’s economy than with the US. The
linked exchange rate system show signs of misalignment from
the theory that HKD interest rates would change in line with USD
interest rates.
Until the USD/HKD comes close to 7.85 then the HKMA can
defend the peg to buy HKD. But this could be a long wait. Our
end-2018 forecast for USD/HKD is 7.790, supported by strong
inflows into Hong Kong’s asset markets.
Source: Bloomberg, ING
ING forecasts (NDFs) 1M 7.8000 (7.8175) 3M 7.8000 (7.8076) 6M 7.7800 (7.7917) 12M 7.7600 (7.7734)
Iris Pang, Hong Kong +852 2848 8071
USD/INR
2017 was the best year for INR in a decade Current spot: 63.57
2017 turned out to be the best year for the INR since the 2008
global financial crisis despite some brief weakening pressure
owing to a spike in anxiety about slow growth, rising inflation and
weak public finances.
The INR outlook in 2018 hinges on recovery of the economy from
the dual shocks of de-monetisation and poorly planned tax
reforms. So far so good, at least based on the rallying stock
market and bounce back of INR from the Sep-Nov sell-off.
GDP growth is now gaining upward traction, but inflation is sticky
downward due to higher food and fuel prices. We see little scope
for fiscal consolidation in the FY2018/19 Budget due on 1
February, while the RBI remains in limbo on the monetary policy. Source: Bloomberg, ING
ING forecasts (FWDs) 1M 64.30 (63.77) 3M 65.40 (64.17) 6M 64.80 (64.83) 12M 64.50 (66.08)
Prakash Sakpal, Singapore +65 6232 6181
5.90
6.10
6.30
6.50
6.70
6.90
7.10
5.90
6.10
6.30
6.50
6.70
6.90
7.10
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
Mkt Fwds
ING f'cast
7.70
7.72
7.74
7.76
7.78
7.80
7.82
7.84
7.70
7.72
7.74
7.76
7.78
7.80
7.82
7.84
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
Mkt Fwds
ING f'cast
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
NDFs
ING f'cast
FX talkING January 2018
13
USD/IDR
Surprise strength is unsustainable? Current spot: 13366
The IDR has outperformed recently, appreciating by 1.4% since
end-2017. Foreign ownership of local government bonds rose by
2.9% YTD to 9 January or by around US$1.9bn. Yields of local
government bonds remain one of the highest in Asia. This and
favourable economic fundamentals, entices investors.
Fitch finally upgraded Indonesia’s sovereign rating to BBB in late
December due to more favourable external balances, such as a
narrower current account deficit. FX Reserves had been rising and
ended 2017 at a record US$130bn. Oversubscription of the
US$4bn sovereign bond issue in December shows investor
preference.
BI steady policy supports IDR and local currency bonds. BI should
raise policy rates in 2019 as inflation stays within its target range.
Source: Bloomberg, ING
ING forecasts (NDFs) 1M 13450 (13369) 3M 13460 (13416) 6M 13470 (13523) 12M 13490 (13782)
Joey Cuyegkeng, Philippines +63 2479 8855
USD/KRW
Ahead of the pack again Current spot: 1064
The KRW was the best performing Asian currency in 2017, rising
12.8% from the end of 2016.
2018 will likely be another strong year. The economy remains
robust, though growth is overly concentrated in semiconductor
export growth. But government policies to boost welfare receipts
and minimum wages should help support household spending.
Anticipation of further BoK tightening will also lift the KRW, and
gain traction as negative one-offs drop out of the CPI calculation
through the middle of the year. We suspect there will be
considerable foot-dragging by the BoK, which will do its best to
limit, or reduce the pace of further appreciation to what they feel
is justifiable by fundamentals. Source: Bloomberg, ING
ING forecasts (NDFs) 1M 1060 (1063) 3M 1050 (1062) 6M 1030 (1060) 12M 1000 (1056)
Rob Carnell, Singapore +65 6232 6020
USD/MYR
A favourable macro policy backdrop Current spot: 3.9718
The MYR’s 11% appreciation in 2017 against the USD was the
second-best among Asian currencies. The tighter BNM policy bias
will likely sustain the MYR outperformance in 2018.
After a strong run in the first three quarters of 2017 the export-
led manufacturing recovery appears to have taken a breather in
the final quarter of the year. This is consistent with our forecast
of a slower 4Q17 GDP growth rate of 5.5% compared to 6.2% in
the previous quarter, leading to full-year 2017 growth of 5.8%.
Strong GDP growth has put upwards pressure on inflation and
this has prepared markets for BNM monetary policy
normalization earlier than most other Asian central banks. We
forecast two 25bp policy rate hikes in 1Q and 3Q. Source: Bloomberg, ING
ING forecasts (FWDs) 1M 3.9500 (3.9773) 3M 3.9200 (3.9848) 6M 3.8700 (3.9959) 12M 3.7800 (4.0192)
Prakash Sakpal, Singapore +65 6232 6181
7000
8500
10000
11500
13000
14500
16000
7000
8500
10000
11500
13000
14500
16000
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
NDFs
ING f'cast
950
1000
1050
1100
1150
1200
1250
950
1000
1050
1100
1150
1200
1250
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
NDFs
ING f'cast
2.70
3.00
3.30
3.60
3.90
4.20
4.50
4.80
2.70
3.00
3.30
3.60
3.90
4.20
4.50
4.80
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
Mkt Fwds
ING f'cast
FX talkING January 2018
14
USD/PHP
Worsening trade deficit to bring PHP on the defensive Current spot: 50.32
Moderate weakness for PHP is likely this year as the strong Asian
currency outlook and net FDI inflows on the back of strong
Philippine economic growth will partially offset the weakening
tug of a worsening trade deficit.
November’s trade deficit of US$3.8bn, the largest on record,
reflects imports of supplies and capital equipment for a vibrant
domestic economy. Export growth remains limited due to a
narrow set of products and neutral base effects. The underlying
drivers spell a further worsening of the trade deficit in 2018.
Overseas worker remittances will decreasingly be able to cover
the deficit.
The Central bank (BSP) is likely to continue to lag any tightening
by the US Fed. We expect it to hike policy rates by 25bp in 2Q and
in 4Q to address second round effects of tax reform.
Source: Bloomberg, ING
ING forecasts (NDFs) 1M 50.70 (50.37) 3M 50.80 (50.52) 6M 51.20 (50.79) 12M 50.80 (51.31)
Joey Cuyegkeng, Philippines +63 2479 8855
USD/SGD
MAS likely to resume tightening in April Current spot: 1.3291
2017 was a strong year for the SGD, finishing in fourth place
regionally, behind the KRW, MYR and THB on annual appreciation
vs the USD of 8.3%.
The relative strength of the SGD is not so apparent in NEER terms,
where the currency rose more like 3% over the 12 months to end
December 2017. Given the guidance from the MAS that the SGD
was to be kept on a zero appreciation path over this period, our
analysis suggests that it is towards the middle of the upper half
of the guidance corridor.
We anticipate the appreciation guidance for the SGD NEER to be
changed to a small appreciation, with no change in the width of
the band, perhaps as soon as the April MAS statement. Source: Bloomberg, ING
ING forecasts (FWDs) 1M 1.3200 (1.3281) 3M 1.3100 (1.3266) 6M 1.2800 (1.3243) 12M 1.2500 (1.3186)
Rob Carnell, Singapore +65 6232 6020
USD/TWD
TWD jumps on exporters’ conversion of export receipts Current spot: 29.62
It has become a seasonal pattern that the TWD jumps around the
end of one year to early the following year, as exporters convert
dollar receipts from exports into the local currency. This
strengthening pattern usually ends after the Chinese New Year.
We expect strong global growth and demand for semi-
conductors in 2018, which is in beneficial for Taiwan exports. We
believe that global demand for Taiwan’s exports can balance off
the cost of TWD appreciation for exporters.
The continued inflows into Taiwan’s asset market are expected to
support for TWD. We expect USDTWD to strengthen to 28.80 by
the end of 2018. Source: Bloomberg, ING
ING forecasts (NDFs) 1M 29.50 (29.56) 3M 29.30 (29.42) 6M 29.00 (29.24) 12M 28.80 (28.92)
Iris Pang, Hong Kong +852 2848 8071
40.0
42.0
44.0
46.0
48.0
50.0
52.0
54.0
40.0
42.0
44.0
46.0
48.0
50.0
52.0
54.0
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
NDFs
ING f'cast
1.10
1.18
1.26
1.34
1.42
1.50
1.10
1.18
1.26
1.34
1.42
1.50
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
Mkt Fwds
ING f'cast
28.0
29.0
30.0
31.0
32.0
33.0
34.0
35.0
28.0
29.0
30.0
31.0
32.0
33.0
34.0
35.0
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
NDFs
ING f'cast
FX talkING January 2018
15
USD/THB
Is there any interest left in this overpriced currency? Current spot: 31.92
Is there any interest left in this overpriced currency after a robust
10% appreciation in 2017, the third-best in Asia? We are sceptical
mainly because of Thailand’s continued weak economic
fundamentals, apart from persistent large external surplus.
Bank of Thailand policymakers concede that growth has been
below potential despite accelerating to 3.9% in 2017, a pace
likely to hold in 2018. As such, there is no inflationary pressure.
CPI inflation has been below the BoT’s 1-4% target.
With our forecast of no change to the BoT rate policy in 2018 the
only positive for the THB this year will be cyclical USD weakness,
though a repeat of 2017 will be a far cry, in our view. Source: Bloomberg, ING
ING forecasts (FWDs) 1M 31.85 (31.95) 3M 31.70 (31.87) 6M 31.50 (31.79) 12M 31.30 (31.68)
Prakash Sakpal, Singapore +65 6232 6181
28.0
30.0
32.0
34.0
36.0
38.0
28.0
30.0
32.0
34.0
36.0
38.0
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
Mkt Fwds
ING f'cast
FX talkING January 2018
16
ING foreign exchange forecasts
EUR cross rates Spot 1M 3M 6M 12M USD cross rates Spot 1M 3M 6M 12M
Developed FX
EUR/USD 1.21 1.20 1.23 1.25 1.30
EUR/JPY 134.9 135.60 138.99 138.75 143.00 USD/JPY 111.22 113 113 111 110
EUR/GBP 0.89 0.88 0.88 0.88 0.85 GBP/USD 1.37 1.36 1.40 1.42 1.53
EUR/CHF 1.18 1.18 1.20 1.22 1.25 USD/CHF 0.97 0.98 0.98 0.98 0.96
EUR/NOK 9.65 9.65 9.60 9.50 9.40 USD/NOK 7.96 8.04 7.80 7.60 7.23
EUR/SEK 9.82 9.60 9.50 9.50 9.50 USD/SEK 8.09 8.00 7.72 7.60 7.31
EUR/DKK 7.449 7.440 7.445 7.450 7.460 USD/DKK 6.14 6.20 6.05 5.96 5.74
EUR/CAD 1.52 1.49 1.53 1.53 1.55 USD/CAD 1.252 1.24 1.24 1.22 1.19
EUR/AUD 1.54 1.54 1.58 1.56 1.53 AUD/USD 0.79 0.78 0.78 0.80 0.85
EUR/NZD 1.68 1.67 1.66 1.64 1.67 NZD/USD 0.72 0.72 0.74 0.76 0.78
EMEA
EUR/PLN 4.17 4.18 4.15 4.14 4.12 USD/PLN 3.43 3.48 3.37 3.31 3.17
EUR/HUF 308.9 310.00 310.00 304.00 298.00 USD/HUF 254.4 258 252 243 229
EUR/CZK 25.53 25.4 25.2 25.0 24.8 USD/CZK 21.03 21.2 20.5 20.0 19.1
EUR/RON 4.64 4.65 4.68 4.70 4.67 USD/RON 3.82 3.88 3.80 3.76 3.59
EUR/HRK 7.43 7.45 7.40 7.30 7.40 USD/HRK 6.13 6.21 6.02 5.84 5.69
EUR/RSD 118.5 119.0 119.0 118.0 117.0 USD/RSD 97.6 99.2 96.7 94.4 90.0
EUR/RUB 68.68 69.0 73.1 73.3 75.4 USD/RUB 56.57 57.5 59.4 58.6 58.0
EUR/UAH 34.55 34.2 34.4 36.3 39.0 USD/UAH 28.54 28.50 28.00 29.00 30.00
EUR/KZT 400.0 396.0 399.8 400.0 403.0 USD/KZT 329.6 330 325 320 310
EUR/TRY 4.56 4.50 4.74 4.81 5.40 USD/TRY 3.75 3.75 3.85 3.85 4.15
EUR/ZAR 15.11 15.3 16.3 16.9 17.6 USD/ZAR 12.44 12.75 13.25 13.50 13.50
EUR/ILS 4.13 4.08 4.12 4.13 4.23 USD/ILS 3.40 3.40 3.35 3.30 3.25
LATAM
EUR/BRL 3.90 3.90 4.06 4.31 4.23 USD/BRL 3.22 3.25 3.30 3.45 3.25
EUR/MXN 23.12 23.2 24.1 25.6 24.4 USD/MXN 19.04 19.30 19.60 20.50 18.80
EUR/CLP 732.18 732 756 775 780 USD/CLP 603.03 610 615 620 600
EUR/ARS 22.69 22.44 23.00 23.75 25.94 USD/ARS 18.69 18.70 18.70 19.00 19.95
EUR/COP 3468.00 3420 3530 3688 3770 USD/COP 2856.57 2850 2870 2950 2900
EUR/PEN 3.91 3.85 3.95 4.00 4.15 USD/PEN 3.22 3.21 3.21 3.20 3.19
Asia
EUR/CNY 7.85 7.74 7.87 7.94 8.19 USD/CNY 6.47 6.45 6.40 6.35 6.30
EUR/HKD 9.50 9.36 9.59 9.73 10.09 USD/HKD 7.82 7.80 7.80 7.78 7.76
EUR/IDR 16175 16140 16556 16838 17537 USD/IDR 13353 13450 13460 13470 13490
EUR/INR 77.17 77.2 80.4 81.0 83.9 USD/INR 63.64 64.30 65.40 64.80 64.50
EUR/KRW 1281.47 1272 1292 1288 1300 USD/KRW 1064.90 1060 1050 1030 1000
EUR/MYR 4.81 4.74 4.82 4.84 4.91 USD/MYR 3.97 3.95 3.92 3.87 3.78
EUR/PHP 61.00 60.8 62.5 64.0 66.0 USD/PHP 50.36 50.7 50.8 51.2 50.8
EUR/SGD 1.61 1.58 1.61 1.60 1.63 USD/SGD 1.33 1.32 1.31 1.28 1.25
EUR/TWD 35.74 35.4 36.0 36.3 37.4 USD/TWD 29.62 29.5 29.3 29.0 28.8
EUR/THB 38.77 38.2 39.0 39.4 40.7 USD/THB 31.93 31.9 31.7 31.5 31.3
Source: Bloomberg, ING
FX talkING January 2018
17
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