24 Mar 2014
EM’s still suffering - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale comments on the on going effects of super easy monetary policy and dollar valuation and how EM’s are suffering.
Key Quotes
"FX markets still have to contend with the on-going effects of super-easy policy and the dollar's valuation. Over in the FT, James Kynge's piece 'EM held back by weak global recovery' captures the mood in emerging markets."
"Not enough exports to developed markets that are growing too slowly. Actually, I think EM suffers on three levels."
"Firstly, a decade of negative real rates in the US has led to many EM currencies becoming overvalued and their exports becoming uncompetitive - the US in particular has succeeded in bringing manufacturing jobs home as a result. The problem is not just lack of demand."
"Secondly, as the US heads towards energy independence one major source of external growth for some countries just isn't as strong as it was. And finally, when EM economies make up 50% of the global total, they just can't outgrowth the rest by selling to them, to the same extent as they used to."
"EM economies need a new growth model and even if China's attempts to find one aren't painless, at least China is trying. But in the FX world, the temptation to regain export competitiveness with a cheaper currency just won't go away for many."
Key Quotes
"FX markets still have to contend with the on-going effects of super-easy policy and the dollar's valuation. Over in the FT, James Kynge's piece 'EM held back by weak global recovery' captures the mood in emerging markets."
"Not enough exports to developed markets that are growing too slowly. Actually, I think EM suffers on three levels."
"Firstly, a decade of negative real rates in the US has led to many EM currencies becoming overvalued and their exports becoming uncompetitive - the US in particular has succeeded in bringing manufacturing jobs home as a result. The problem is not just lack of demand."
"Secondly, as the US heads towards energy independence one major source of external growth for some countries just isn't as strong as it was. And finally, when EM economies make up 50% of the global total, they just can't outgrowth the rest by selling to them, to the same extent as they used to."
"EM economies need a new growth model and even if China's attempts to find one aren't painless, at least China is trying. But in the FX world, the temptation to regain export competitiveness with a cheaper currency just won't go away for many."