US election fuels currency volatility

2016 ◽  
Keyword(s):  
Focal Point ◽  
Emerging Market ◽  
European Monetary ◽  
German Government ◽  
Government Bonds ◽  
Content Type ◽  
The Us ◽  
Outstanding Debt ◽  
Japanese Yen ◽  
European Monetary Policy

Significance The peso has lost a further 6.3% against the dollar since September 6 despite the decision by the US Federal Reserve on September 21 to keep its benchmark rate on hold, underpinning a rally in emerging market assets. A victory for Trump would weigh heavily on the dollar if investors pile into haven assets such as the Japanese yen and German government bonds. Impacts At nearly 30% of total outstanding debt, negative-yielding government bonds will increase demand for higher-yielding emerging market assets. Credibility and efficacy of Japanese and European monetary policy in stabilising markets will be a focal point for investor anxiety. Oil prices are still struggling to rally following a proposal by OPEC members to cut production.

Yen surge to question global monetary easing's effects

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Central Banks ◽  
Recent Improvement ◽  
German Government ◽  
Monetary Policies ◽  
Government Bonds ◽  
Content Type ◽  
Negative Interest Rates ◽  
The Us ◽  
Fiscal Support

Significance Despite aggressive easing by both the Bank of Japan (BoJ) and the ECB, including negative interest rates, the lowering of expectations over the scale and pace of rate hikes by the US Federal Reserve (Fed) has negated their attempts to weaken their currencies and thus boost export-driven growth. This is heightening concern that ultra-loose monetary policies have passed the point where they can revive growth and inflation. Impacts Despite the recent improvement due to the oil price rebound since mid-February, sentiment towards EM currencies will remain fragile. The still strong demand for 'safe-haven' assets, such as German government bonds and gold, implies investors will remain cautious. Negative deposit rates will further undermine banks' earnings, amid persistent concerns about capital levels. Central banks will reach the limits of their capacity to promote growth without fiscal support from governments.

Amid many unknowns, EM assets will remain strained

2017 ◽  
Keyword(s):  
Emerging Market ◽  
Treasury Bonds ◽  
Government Bonds ◽  
Content Type ◽  
Bond Yield ◽  
The Us ◽  
Equity Funds ◽  
Treasury Bond ◽  
Mexican Peso ◽  
Bureau Of Labor Statistics

Subject Emerging markets under strain from dollar rally. Significance The US Bureau of Labor Statistics reported on January 6 that average hourly earnings grew at the fastest pace since 2009 in December -- a further fillip to the ‘trumpflation trade’ that has gripped financial markets since the victory of Donald Trump in the US presidential election. Expectations of further Fed rate increases have driven the dollar index and the ten-year Treasury bond yield higher, straining emerging market (EM) assets. EM mutual equity funds have suffered a wave of uninterrupted outflows since Trump’s victory. The Mexican peso and the Turkish lira have plumbed record lows against the dollar. Impacts Many EMs are preparing to sell dollar-denominated debt in anticipation of higher borrowing costs, including Argentina, Brazil and Nigeria. Speculative bets against US Treasury bonds have risen to a record high amid expectations of higher US inflation and further rate hikes. The stock of negative-yielding government bonds stands at 10.8 trillion dollars, fuelling demand for higher-yielding securities. In April, the US Treasury’s next Foreign Exchange Report could label China a currency manipulator though the criteria would need to change.

US-induced volatility clouds the 2019 markets outlook

2018 ◽  
Keyword(s):  
Financial Markets ◽  
Focal Point ◽  
Emerging Market ◽  
Bond Yields ◽  
Content Type ◽  
The Us ◽  
Treasury Bond ◽  
Asset Class ◽  
Main Support ◽  
Global Growth

Significance The idiosyncratic vulnerabilities that built up in financial markets in 2018 are morphing into a more pronounced global growth scare, exacerbated by concerns about the US Federal Reserve (Fed) being too hawkish. The combination of slower euro-area and Chinese growth and US monetary tightening is weighing on asset prices and increasing volatility after a year in which almost every major asset class suffered a loss. Monetary stimulus withdrawal is the focal point, as it has been the main support for markets since 2008. Impacts Ten-year US Treasury bond yields are down 50 basis points since April; global growth worries will make such ‘safe havens’ more attractive. Amid the worries, emerging market (EM) equities are up 1.5% from an October 29 low and may be more resilient than in previous downturns. The Brent crude oil price will be to the lower end of 50-80 dollars/barrel in 2019 amid growth and oversupply worries, reducing inflation.

Brexit vote will keep global markets volatile

2016 ◽  
Keyword(s):  
Spillover Effects ◽  
Government Bonds ◽  
Content Type ◽  
The Us ◽  
Bank Of England ◽  
Systemic Crisis ◽  
Bank Funding ◽  
Japanese Yen ◽  
The Uk ◽  
The Eu

Significance The UK vote on June 23 to leave the EU ('Brexit') startled global financial players, putting pressure on leading central banks to stabilise markets and keep bank funding flowing. The Bank of England (BoE) announced that it was ready to provide an extra 250 billion pounds (341 billion dollars) to ease liquidity conditions while the ECB is also ready to deploy significant funds to avert a liquidity squeeze. Impacts Market conditions will remain volatile, but there is little sign that markets are treating the vote as a systemic crisis. Investor demand for safe-haven assets will spike; assets such as gold, the Swiss franc and the Japanese yen will appreciate. The ECB's QE programme could help insulate euro-area peripheral government bonds from the spillover effects of Brexit. Having been surprised by the UK referendum, markets will become more sensitive to political risk ahead of the US election.

Pollo Campero in the USA

2014 ◽  
Vol 52 (9) ◽  
pp. 1649-1679 ◽  
Author(s):  
Esteban R. Brenes ◽  
Amitava Chattopadyay ◽  
Luciano Ciravegna ◽  
Daniel Montoya
Keyword(s):  
Fast Food ◽  
Competitive Strategy ◽  
Corporate Strategy ◽  
Emerging Market ◽  
International Strategy ◽  
Content Type ◽  
Emerging Market Multinationals ◽  
Consumer Segmentation ◽  
The Us

Purpose – This case illustrates the challenges that Pollo Campero, a Guatemalan fast food company, faces when expanding in the US market. The purpose of this paper is to stimulate a discussion about consumer segmentation, competitive strategy and the internationalization of emerging market multinationals. Design/methodology/approach – The case study is based on primary research conducted in conjunction with the company, including interviews with senior management and an ample review of documents. Secondary sources have been used to gather information about the industry, the US market and consumer segments. Findings – The case illustrates that Pollo Campero was initially very successful in the US market because it appealed to consumers of Central American origin. It found it harder to appeal to a broader range of US consumers, who had no emotional attachment to the brand. Originality/value – This is a complex, in-depth case study suitable for use with advanced MBA students and practitioners. Depending on the aims of the instructor, different aspects of the case can be highlighted and it can be used in a competitive strategy class as well as in a corporate strategy class or a strategic marketing course. It can be used in a class focussing on brand, positioning and consumer segmentation, a class on competitive strategy in the fast food industry, or a class on the international strategy of emerging market multinationals.

scholarly journals Monetary spillovers and real exchange rate misalignments in emerging markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Krittika Banerjee ◽  
Ashima Goyal
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Fixed Effects ◽  
Emerging Market ◽  
Content Type ◽  
Portfolio Flows ◽  
The Us ◽  
Common Correlated Effects ◽  
Monetary Neutrality ◽  
The Impact

PurposeAfter the adoption of unconventional monetary policies (UMPs) in advanced economies (AEs) there were many studies of monetary spillovers to asset prices in emerging market economies (EMEs) but the extent of contribution of EMEs and AEs, respectively, in real exchange rate (RER) misalignments has not been addressed. This paper addresses the gap in a cross-country panel set-up with country specific controls.Design/methodology/approachFixed effects, pooled mean group (Pesaran et al., 1999) and common correlated effects (Pesaran, 2006) estimations are used to examine the relationship. Multiway clustering is taken into account to ensure robust statistical inferences.FindingsRobust evidence is found for significant monetary spillovers over 1998–2017 in the form of RER overvaluation of EMEs against AEs, especially through the portfolio rebalancing channel. EME RER against the US saw significantly more overvaluation in UMP years indicating greater role of the US in monetary spillovers. However, in the long-run monetary neutrality holds. EMEs did pursue mercantilist and precautionary policies that undervalued their RERs. Precautionary undervaluation is more evident with bilateral EME US RER.Research limitations/implicationsIt may be useful for large EMEs to monitor the impact of foreign portfolio flows on short-run deviations in RER. Export diversification reduces EME mercantilist motives against the US. That AE monetary policy significantly appreciates EME RER has implications for future policy cooperation between EMEs and AEs.Originality/valueTo the best of the author's knowledge such a comparative analysis between AE and EME policy variables on RER misalignment has not been done previously.

Co-movements between the British pound, the euro and the Japanese yen: the Brexit impact

2019 ◽  
Vol 46 (2) ◽  
pp. 467-481 ◽  
Author(s):  
Susana Alvarez-Diez ◽  
J. Samuel Baixauli-Soler ◽  
Maria Belda-Ruiz
Keyword(s):  
Negative Impact ◽  
Individual Investors ◽  
Investment Strategies ◽  
Conditional Correlation ◽  
Content Type ◽  
Dynamic Conditional Correlation ◽  
The Us ◽  
International Trading ◽  
Portfolio Managers ◽  
Japanese Yen

PurposeThe purpose of this paper is to analyze the Brexit effect – pre-Brexit and post-Brexit referendum periods – on the co-movements between the British pound (GBP), the euro (EUR) and the yen (JPY) against the US dollar (USD).Design/methodology/approachTo ascertain the asymmetric behavior of dynamic correlations, the authors use the dynamic conditional correlation (DCC) model, the asymmetric dynamic conditional correlation (A-DCC) model and the diagonal BEKK model assuming Gaussian and Student’stdistribution. Several dummy variables have been included in order to identify the main periods related to Brexit.FindingsFindings show a negative impact of the pre-Brexit referendum period on the correlation between GBP and EUR, while there is no significant effect on GBP–JPY and EUR–JPY pairs. The loss of correlation in the GBP–EUR pairing has not recovered during the post-Brexit referendum period, which could be attributed to the uncertainty about the final impact of Brexit on British and Eurozone economies.Practical implicationsThe loss of correlation in the GBP–EUR pair has important implications for individual investors, portfolio managers and traders with respect to hedging activities, international trading and investment strategies.Originality/valueThe results are the first to address how Brexit has impacted on the co-movements between exchange rates using different multivariate models that allow for correlations to change over time.

Prospects for emerging economies to end-2016

2016 ◽  
Keyword(s):  
Fiscal Policy ◽  
Exchange Rates ◽  
Emerging Economies ◽  
Federal Reserve ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Political Risks ◽  
The Us ◽  
Growth Prospects

Subject Prospects for emerging economies to end-2016. Significance Despite political risks causing bouts of volatility in countries such as Brazil and Turkey, emerging market (EM) growth prospects have improved moderately and asset prices have rebounded after the turbulence of early 2016. More stability in exchange rates has helped, with the US Federal Reserve (Fed) holding off raising rates. The rebound in commodity prices has been supportive, too, together with receding concerns about China's slowdown. Some countries have also eased fiscal policy to reduce social tensions risks.

Central European local investors will hold on to bonds

2017 ◽  
Keyword(s):  
Emerging Market ◽  
Bond Markets ◽  
Content Type ◽  
Developed Economies ◽  
Local Currency ◽  
Domestic Debt ◽  
The Us ◽  
Debt Market ◽  
Us Presidential Election ◽  
To Come

Significance The lira’s collapse is fuelling outflows from Turkey’s local currency government debt market, as foreign investors reduce their purchases of emerging market (EM) domestic debt amid a sharp sell-off in bond markets following Donald Trump’s upset victory in the US presidential election. Both Hungary and Poland -- hitherto two of the most resilient EMs -- suffered net outflows last year and are likely to come under further pressure as the ECB starts to scale back, or ‘taper’, its programme of quantitative easing (QE) in April. Impacts The dollar’s rise against a basket of other currencies since the US election will put severe strain on EM assets. The surging price of Brent crude is improving the inflation and growth outlook. Higher international oil prices will also reduce the scope for further easing of monetary policy in developing and developed economies.

Financial market buoyancy is fragile amid rising risks

2020 ◽  
Keyword(s):  
Financial Market ◽  
Emerging Market ◽  
Equity Markets ◽  
Equity Fund ◽  
Government Bonds ◽  
Content Type ◽  
Financial Conditions ◽  
Forward Price ◽  
Growth Prospects ◽  
Global Growth

Subject Financial market momentum. Significance Global bond and equity markets continue to rally after making their largest annual gains since 2010 last year. Markets are brushing off a plethora of risks, from the escalation in tensions between Tehran and Washington to concerns about weak global growth, particularly in Europe. While valuations are becoming dangerously stretched -- the forward price-to-earnings ratio of the benchmark S&P 500 index is at the highest since 2011 -- the absence of a credible catalyst for a sharp sell-off is helping to underpin positive sentiment. Financial conditions remain exceptionally loose. Impacts Demand for government bonds is building momentum and the ten-year US treasury yield is just 40 basis points above its all-time low of 2017. Emerging-market bond and equity fund inflows have momentum and while several risks could curb this, a sustained reversal is unlikely. The Shanghai stock market has lost 5% since Wuhan’s coronavirus outbreak spread beyond China on January 13; further falls are likely. Despite low market volatility, government debt markets are much more pessimistic than equity markets about global growth prospects.

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