Thursday, July 31, 2008

Emerging Markets

A rundown of Emerging Markets....

Brazil. Bovespa up over 3% and the currency just keeps on appreciating. The trend of the last 4 years just refuses to stop. part of the reason was the good U.S. numbers today. ADP employment was up 6,000 jobs against an expected loss of 60,000.

``Good news from U.S. markets makes investors more confident and willing to take on more risk,'' said Francisco Carvalho, currency trading manager at Sao Paulo-based brokerage Liquidez Corretora.

I do not currently have a position here but would play it from the short (dollar) side for short term plays.

Chile. The Peso weakened alot today closing up near 507.00. I didn't see any specific news for this but I think we are basically range bound with a slight bias toward a higher Usd/Clp.

Colombia. Similar to the Chile. The peso traded weaker most of the session and couple that with the Central Banks desire for a weaker Peso I see no reason to buck this move. I think the only reason we are not higher was the rate rise last Friday. Eventually the interest rate differential will kick in but for now I think the Dollar moves higher here.

Argentina. In a word UGH. The market is looking for dollars across the curve, but specifically against 1,2,3 months. Although spot has not moved up much, the rates have moved higher in these periods. Argentina is always a difficult currency for me to short and this time is no different. I squared up my position and am currently only running a small yield curve play. For this I am grateful as I have a bad feeling here that a meltdown may be quickly approaching.

. The short covering sqeeze of last Friday is all but forgotten and it looks like we are once again ready to take out the 10.00 level. Stay short dollars for now, the trend and interest rate differencial are in your favor.

And now a little Asia.

Korea. This currency is trading totally in line with crude. Today crude rally's 4 dollars and Usd/Krw moves higher. I think this crude move is short lived and we will be seeing sub $120 a barrel very shortly. Therefore and high oil consumers (India, China, Korea, and the good old USA) currency should do well.

Good Luck and Good Currency Trading



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