Forex Investment and Currency Trading

Chile: The central bank cut the policy rate by 50bp to 1.75%, as expected, over the Easter holiday noting further cuts could be necessary. The cut followed two aggressive 250bp cuts at previous meetings with the pace of easing having to be slowed down as the policy rate approaches the zero bound. As monetary policy easing cycles are close to approaching an end in the region, traders are starting to look further out the nominal rates curves for trading opportunities.The CLP may benefit from positive economic news out of China over the weekend which has contributed to stronger copper prices.
Brazil: [...]

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Argentina – The Argentine economy will likely slow considerably after years of robust growth, as exports stall coincident with sharply lower commodity prices and a loss in confidence in present policies. The Ecuadorian debt default will likely influence Argentina, as both nations share a dependence on commodities and state heavily intervening in the domestic economy. The central bank will likely reduce intervention in currency markets and the ARS should depreciate more sharply.
Brazil – Growth will likely fade more dramatically as 2009 begins due to weaker domestic demand, tighter credit conditions, and lower export prices. Inflation also appears to have peaked [...]

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Brazil: The weekly central bank survey showed inflation expectations adjusted upward once again with IPCA expected to end the year at 6.40% (from 6.31% previously) and end 2009 at 5.20% from 5.06% previously. Surveyed economists expect COPOM to remain on hold at the December 10 meeting and cut rates by 50bp in 2009.
Inflation measures released last week mostly showed higher monthly rates of inflation than their previous print due in large part to the end of food deflation seen in previous weeks. However on an annual basis, inflation is meaningfully lower than 2Q and 3Q and the central bank is [...]

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Argentina. Lower agricultural production, a negative capital account, and lower export prices - these factors will likely prevent the peso from further appreciating in real terms in 2009. The peso is expected to trade at about USD/ARS3.35 at the end of 2008 and USD/ARS3.9 at the end of 2009. Downside risks are significant given the external outlook, but the government will likely try to limit depreciation as much as possible before the October 2009 midterm elections. Inflation has decelerated toward 21%–22% year over year in September from a peak of 25%–26% in May, and will likely remain at this level [...]

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