What Drives Emerging Market FX Performance?

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Sept. 25 (Bloomberg) -- JPMorgan Funds Global Market Strategist Andres Garcia-Amaya and Bloomberg's Adam Johnson look at emerging markets currencies on today's "Chart Attack" on Bloomberg Television's "Street Smart." (Source: Bloomberg)

We show you a couple of charts that will make you smarter.

We are talking about emerging markets.

Are we going to walk people through these charts?

Let's start with emerging markets currencies.

When you speak about emerging markets, they are not all created equal, right?

There are different drivers.

Some currencies have gotten destroyed and other ones have held up pretty nicely.

Let's show people what we are talking about.

In this chart, we are looking at a variety of currencies.

On the right, indonesia and south africa.

Their currencies have taken a toll.

On the other side, china and mexico, who have held up pretty nicely.

Once you see it spread out like this, lumping the emerging markets together, it is totally absurd.

To say brazil and china in the same breath, it is not fair.

Let's take that concept a step further.

What do you see?

There is a lot of drivers for currencies that are idiosyncratic.

There are some macro drivers.

I would put different currencies into buckets.

Currencies that tend to perform well because their countries are exporters of commodities.

Versus other countries that are importers of commodities.

That is one driver.

The other one is if you are an economy that has a current deficit, you depend on foreign flows to finance your growth, you will do well if the world is full of liquidity.

You will not do well if qb goes away and interest rates in the united states go up -- q e goes away and interest rate in united states go up.

This is our second chart.

Explain to viewers the upper left corner versus the lower right.

On the top left, brazil is a country that exports a lot of commodities.

In the earlier part of the 2000 and commodities were rallying, results currencies were going to do really well.

-- brazil's currencies were going to do really well.

Result tended to benefit when monetary policy -- brazil tended to benefit when monetary policy was doing very well.

China is a commodity importer.

The currency benefits when commodities depreciate.

It benefits when liquidity dries up.

China should be insulated because they have a surplus.

This is the group you want to be with.

China, philippines, hungary, thailand.

They do not need outside money.

They are importers of commodities.


It depends on what your theory is on quantitative easing.

It is important to keep in mind.

You have to come see us again . they do not let you out often at

This text has been automatically generated. It may not be 100% accurate.


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