2 Sep 2013
Flash: 'Risk-on risk-off' phenomenon returning - HSBC
FXstreet.com (Barcelona) - Some currencies are back adopting its old pattern of the 'risk-on and risk-off' phenomenon, in which, as HSBC explains, a common factor causes all markets to move together.
Key Quotes
"Talk of tapering off in the US is now fostering a collective fear among those currencies reliant on foreign funding for their current account deficits."
"Two caveats are worth noting. Firstly, this growing synchronisation is confined to emerging market FX, with G10 currencies still trading largely independent of each other. Secondly, even within EM, the currencies may be moving in similar directions, but the strongest correlations are confined to those currencies most under stress."
"So while 'risk-on risk-off' is making a comeback in FX, there is still scope to capitalise on local differentiating factors."
Key Quotes
"Talk of tapering off in the US is now fostering a collective fear among those currencies reliant on foreign funding for their current account deficits."
"Two caveats are worth noting. Firstly, this growing synchronisation is confined to emerging market FX, with G10 currencies still trading largely independent of each other. Secondly, even within EM, the currencies may be moving in similar directions, but the strongest correlations are confined to those currencies most under stress."
"So while 'risk-on risk-off' is making a comeback in FX, there is still scope to capitalise on local differentiating factors."