Tuesday, June 05, 2007

Soros speaks...and the market listens.....

Soros who has a rather large investment in Brazilian Ethanol was quoted as saying today that the Brazilian currency was "Overvalued". At first there was little reaction to the news, but coupled with a weak stock market and othe EM markets underperforming on the day the currency set out on a weakening pace. Tomorrow night is the rate announcement with the market strongly split over 25 and 50 bp. I think either way we are looking at a re-trace trade as there is alot of money in EM and I think we need a bit of a break.

Two other reasons why I feel this way:

1. U.S. rates continue to head higher


2. Moody's upgraded South Africa today and the Rand weakened considerably.

Two signs which are not good for EM in general.




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