marctomarket.com / Dr. Win Thin / March 20, 2017
EM FX had a stellar week, ending on a strong note in the aftermath of what the market perceived as a dovish Fed hike Wednesday. Every EM currency except ARS was up on the week vs. USD, with the best performers ZAR, TRY, COP, and MXN. There are some risks ahead for EM this week, with many Fed speakers lined up and perhaps willing to push back against the market’s dovish take on the FOMC.
Taiwan reports February export orders Monday, which are expected to rise 17.8% y/y vs. 5.2% in January. The central bank holds its quarterly policy meeting Thursday and is expected to keep rates steady at 1.375%. While the central bank does not have an explicit inflation target, rising price pressures are likely to push it into a more hawkish stance this year. While steady rates are likely in 2017, the start of a tightening cycle is possible in 2018. Taiwan also reports February IP Thursday, which is expected to rise 10% y/y vs. 2.8% in January.
Chile reports Q4 GDP Monday, which is expected to grow 0.5% y/y vs. 1.6% in Q3. If so, this would be the slowest rate since Q3 09. No wonder the central bank is easing, as it just cut rates for a second time since the easing cycle started in January. With inflation below the 3% target, further easing seems likely. Next policy meeting is April 13, and another 25 bp cut then is possible.
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