Mercado Released [07 September 2015]: Emerging Markets Currencies Drop
Most commodities currencies have lost against the greenback this year. Currencies that are leading in losses are the Brazilian real and the Russian ruble. These currencies have declined 30.6% and 21.9% against the dollar, respectively this year. Currency volatility is on the rise especially for emerging markets because of subdued commodity prices and as investors continue turning to the dollar in anticipation of the looming interest rate increase. On the other side, the dollar continue to rise as US macro data such as labour data, automobile sales and wage growth bolster expectations of the rate hike. Last week the dollar biggest gains were against the rand and real. The rand and real weakened by 4.0% and 6.8%, respectively. Commodity currencies are continuing being hit hard on risk off sentiments as slowdown in global growth persist. The currency of the world’s biggest energy exporter, Russia’s ruble has crumpled by 30.6%. We believe that commodity driven countries will somewhat benefit from the strengthening of the dollar and slowdown in China because it empowers exports. The Russian wheat is now on demand, Brazilian coffee producers are benefiting from the weaker real and effects on the platinum majors would be worse if the rand had not depreciated because the rand denominated costs such as labour costs would have a higher impact.
Week 37 2015