Forex Investment and Currency Trading

This was another poor week for emerging market currencies as a whole, with a number reaching new record lows against their base currency (including the Hungarian forint, Indian rupee, Mexican peso and the Turkish lira), another set reaching multi-year lows (including the Argentine peso, the Kenyan shilling, the Korean won, the Mauritius rupee, the Taiwan dollar and the Tunisian dinar) and one formal devaluation (the Armenian dram).
KOREA: The Korean won has been the worst performing currency in Asia over the last seven months. Early this week, it appeared that the trend was continuing as the currency fell from 1,534 per [...]

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The nascent “bear market” rally driven by valuations, technical factors and public policy measures will likely be invigorated by a further ease in EM inflation, increased policy flexibility and, at some stage, stabilization in the slide in economic activity.
First, the potential for a rapid reduction in inflation will likely provide EM central banks with additional flexibility to further reduce local rates. “Base effects” will likely help promote a consistent reduction in reported inflation through early 2009, although important country and regional differences will likely exist.
Second, a few macro indicators are beginning to suggest that the pace of deterioration in the [...]

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The recent global firestorm wreaked havoc on Emerging Market (EM) assets. No EM region was spared and African markets were also impacted.
FX Correlations

African currencies, outside of BWP and ZAR, still have very low or negative correlations with EM FX
BWP and ZAR have consistently the highest correlations within Africa to other major EM currencies
NGN correlations with TRY, BRL and IDR are becoming increasingly negative
KES correlations have increased marginally from very low levels; higher correlation with TRY
GHC, ZMK and TZS have very low or negative correlations with TRY, BRL and IDR
ZAR and BWP have consistently the highest correlations to other major EM [...]

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Emerging financial markets will likely experience wide gyrations. Fluctuations should trace
extreme macro events ranging from financial rescue package relief to the on-going reality
of slower global growth. Although signs are surfacing that the unease in advanced economy money markets is beginning to dissipate, progress is hardly evident for Emerging Markets (EM) with some signs of serious strain in select nations.
The widely discuss USD Libor-Overnight Indexed Swap (OIS) spread in advanced economy money markets has provided an effective measure of stress in global macro conditions. The Libor-OIS spread has also served as a meaningful representation for the transmission of stress from advanced [...]

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