A framework for evaluating EM currencies’ fair value
In our recent extended panel assessment on EM FX, we found most currencies have yet to recover ‘fair value’ after the March 2020 overshooting event. Estimates considered; regional stories emerge.
What you will learn:
- In Latin America, massive political noise has been a key ingredient for larger FX discounts. Meanwhile, EMEIA currency misalignments are mixed, with forecasts consistent with fundamentals continuing to improve in the near future.
- Our FX valuation model produces common elasticities for 15 EM economies.
- Model residuals are interpreted as misalignments, decoupled from key economic fundamentals controlled by high-frequency variables.
BoK’s monetary policy to tighten even as hiking cycle ends
Even without rate hikes, central banks' monetary policies can effectively tighten if the nominal neutral rate falls below the policy rate. We expect this will be the case for the Bank of Korea this year, as the gap between the policy rate and the nominal neutral rate widens.Find Out More
China: Emerging green shoots in Spring, but not out of the woods
We now incorporate a faster recovery from the post-Covid exit wave and raise our 2023 full-year GDP growth forecast to 4.5% (from 4.2% previously).Find Out More