FX

US Dollar Weakens Despite Rates Differentials Tailwinds

Emerging markets sovereign credit spreads are tightening this week and their currencies rebounding against the US dollar, as short-term appetite for risk has come back (though it may be short-lived)

Published ET

US Dollar Index & Deutsche Bank Currency Volatility Index | Sources: ϕpost, Refinitiv data

US Dollar Index & Deutsche Bank Currency Volatility Index | Sources: ϕpost, Refinitiv data


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QUICK SUMMARY

  • The US Dollar Index is down -0.20% at 92.77 (YTD: +3.10%)
  • Euro up 0.14% at 1.1796 (YTD: -3.4%)
  • Yen down 0.36% at 110.26 (YTD: -6.3%)
  • Onshore Yuan up 0.25% at 6.4664 (YTD: +0.9%)
  • Swiss franc up 0.49% at 0.9174 (YTD: -3.5%)
  • Sterling up 0.65% at 1.3714 (YTD: +0.3%)
  • Canadian dollar up 0.93% at 1.2563 (YTD: +1.4%)
  • Australian dollar up 0.37% at 0.7356 (YTD: -4.4%)
  • NZ dollar up 0.74% at 0.6967 (YTD: -3.0%)

MACRO DATA RELEASES

  • Argentina, Monthly Economic Activity Estimator, Change Y/Y for May 2021 (INDEC, Argentina) at 13.60 %, below consensus estimate of 16.00 %
  • Mozambique, Policy Rates, Standing Lending Facility for Jun 2021 (Bank of Mozambique) at 16.25 %
  • Poland, Retail Sales, Change Y/Y, Price Index for Jun 2021 (CSO, Poland) at 13.00 %, above consensus estimate of 11.20 %
  • Slovakia, Unemployment, Rate, Total, registered for Jun 2021 (UPSVAR, Slovakia) at 7.80 %, below consensus estimate of 7.83 %
  • South Africa, CPI, Urban Areas, Headline, Change P/P, Price Index for Jun 2021 (Statistics, SA) at 0.20 %, in line with consensus estimate
  • South Africa, CPI, Urban Areas, Headline, Change Y/Y, Price Index for Jun 2021 (Statistics, SA) at 4.90 %, above consensus estimate of 4.80 %
FX Majors Today | Sources: ϕpost, Refinitiv dataFX Majors This Week | Sources: ϕpost, Refinitiv data

GLOBAL 5-YEAR NOMINAL INTEREST RATES DIFFERENTIALS

  • US-GERMANY: +3.9 bp at 142.0 bp (YTD change: +30.9 bp)
  • US-JAPAN: +6.2 bp at 88.5 bp (YTD change: +40.2 bp)
  • US-CHINA: +7.7 bp at -198.8 bp (YTD change: +58.3 bp)

GLOBAL 10-YEAR REAL INTEREST RATES DIFFERENTIALS

  • US-GERMANY: +5.1 bp at 68.3 bp (YTD change: +22.2bp)
  • US-JAPAN: +7.0 bp at -90.3 bp (YTD change: +11.2bp)
  • JAPAN-GERMANY: -1.9 bp at 158.6 bp (YTD change: +11.0bp)
US CN DE JP Nominal Rates Differentials | Sources: ϕpost, Refinitiv dataUS DE JP Real Rates Differentials | Sources: ϕpost, Refinitiv data

VOLATILITIES TODAY

  • Deutsche Bank USD Currency Volatility Index currently at 6.10, down -0.20 (YTD: -1.07)
  • Euro 1-Month At-The-Money Implied Volatility currently at 5.18, down -0.1 (YTD: -1.5)
  • Japanese Yen 1M ATM IV currently at 5.31, down -0.2 (YTD: -0.8)
  • Offshore Yuan 1M ATM IV currently at 3.90, up 0.1 (YTD: -2.1)
FX 1M ATM Implied Volatilities | Sources: ϕpost, Refinitiv dataJPY EUR CNH 1-Month 10-Delta Risk Reversals | Sources: ϕpost, Refinitiv data

NOTABLE MOVES IN SOVEREIGN CDS TODAY

  • Senegal (rated ): down 5.0 basis points to 381 bp (1Y range: 355-409bp)
  • Peru (rated BBB+): down 1.1 basis points to 81 bp (1Y range: 52-98bp)
  • Russia (rated BBB): down 1.1 basis points to 85 bp (1Y range: 72-129bp)
  • Colombia (rated BB+): down 2.2 basis points to 145 bp (1Y range: 83-164bp)
  • Mexico (rated BBB-): down 1.5 basis points to 95 bp (1Y range: 79-164bp)
  • South Africa (rated BB-): down 3.3 basis points to 200 bp (1Y range: 178-328bp)
  • Panama (rated BBB-): down 1.1 basis points to 68 bp (1Y range: 44-95bp)
  • Brazil (rated BB-): down 3.6 basis points to 173 bp (1Y range: 141-252bp)
  • Saudi Arabia (rated A): down 1.5 basis points to 55 bp (1Y range: 52-101bp)
  • United Arab Emirates (rated AA-): down 2.5 basis points to 60 bp (1Y range: 50-63bp)

CDX EM Sovereign Credit Spread | Sources: phipost.com, Refinitiv data

LARGEST FX MOVES TODAY

  • Philippine Peso up 1.6% (YTD: -4.2%)
  • Canadian Dollar up 1.5% (YTD: +1.4%)
  • Armenian Dram up 1.5% (YTD: +7.5%)
  • CFA Franc BCEAO up 1.4% (YTD: -3.9%)
  • Russian Rouble up 1.2% (YTD: +0.3%)
  • Brazilian Real up 1.2% (YTD: +0.1%)
  • Sao Tome Dobra down 1.4% (YTD: +7.0%)
  • Surinamese dollar down 3.7% (YTD: -32.9%)
  • Venezuela Bolivar down 7.1% (YTD: -71.1%)
  • Seychelles rupee down 15.0% (YTD: +26.5%)

YTD BIGGEST WINNERS & LOSERS

  • Seychelles rupee up 26.5%
  • Mozambique metical up 15.4%
  • Argentine Peso down 12.7%
  • Turkish Lira down 13.2%
  • Haiti Gourde down 23.0%
  • Surinamese dollar down 32.9%
  • Syrian Pound down 49.4%
  • Libyan Dinar down 70.4%
  • Venezuela Bolivar down 71.1%
  • Sudanese Pound down 87.6%