Markets should be in for some good volatility near term as the question of Dubai World will reach a conclusion. Since bailouts are all the rage these days, I have to hold that as the most likely outcome.
If not, well then we should see further pressure on Usd and Gbp funded assets.
Since the Usd has taken over the role as the worlds premier funding currency ahead of the Jpy, albeit with fierce competition from several other currencies in the low yielder category, I guess most assetclasses should be affected under such a scenario.
*Dubai and the Turkey connection - is there one?
Unless my recollection is incorrect, I believe a not irrelevant part of Turkey funding flows stems from this area. Please doublecheck me on it though. The Usd/Try spot reaction yesterday seemed to indicate something out of the ordinary anyway. With skepticism arising re the current governments intentions to initiate and follow an IMF led program, the TRY is increasingly vulnerable. Perhaps not in Dec, but in the New Year.
*Other fixed currency regimes favoured by the markets hot money should pay attention to the Dubai situation
China being a case in point. Fixed exchangerates, undervalued currencies, hot money flooding in as a consequense, hefty misallocation of capital, leading increasing degree of loony investments as a consequence. It happened in Dubai, it is happening in China - for sure.
The scale of the Chinese misallocation process is of course gigantic.
Hopefully it will not unravel nearterm,,,
* New positions and positionchanges
- Took profit on half of the equity index puts sold yesterday, sold equity index calls today.
- Took profit on my SKF ETF on the US open
- Took profit on my long Eur/Sek
As usual, good luck
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3 comments:
Hey. Agree with your bearish try view. The cbt has been cutting far too deeply, long after economic data stabilised (which makes it an outlier). That for me is the big negative. Local fx depos are near record highs however, so locals will be selling usd on spikes. Not too sure what long you hold versus the try - had short tryzar but am hardly enamoured with zar either. Perhaps usdmxn and some Asians.
Hey. Agree with your bearish try view. The cbt has been cutting far too deeply, long after economic data stabilised (which makes it an outlier). That for me is the big negative. Local fx depos are near record highs however, so locals will be selling usd on spikes. Not too sure what long you hold versus the try - had short tryzar but am hardly enamoured with zar either. Perhaps usdmxn and some Asians.
Hi J72!
Im bearish Try, especially as the Usd strength will gain pace next year. Zar will hurt extensively before long me think. Well see.
As usual, appreciate your comments.
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