The first thing I noticed when I turned on my market monitor this morning was the movement in emerging market currencies. Given that the whole market has been dormant for the past 3 weeks, it’s been rare to see any large overnight moves in any asset class. Though the dollar has been close to flat this week against the major crosses, the emerging market currencies have started to weaken, indicating potential signs of risk-on fatigue. Potential is in italics because stocks have frequently defied signs from any other asset markets all year. For a quick summary of the importance of emerging market currencies, read this post from May.
So far this week among some major emerging market currencies:
- Brazilian Real: -0.8%
- Turkish Lira: -1.0%
- Mexican Peso: -0.75%
- Polish Zloty: -1.5%
- Hungarian Forint: -1.5%
Granted, emerging market currencies (and emerging market stocks as well) have been a lagging risk-on asset relative to stocks since the fall of 2011. But I still find it notable when the high-yielding currencies start to lose demand, particularly ahead of the month of September, when bond buying is expected from the 2 largest central banks in the world.
Overnight price action:
- Asia traded mixed, with Japan, Korea, and Taiwan higher, and China and India lower
- Europe is trading down 0.5% and SPX futures are close to flat, in a tight 4 point range overnight
- The dollar and treasuries are both a touch stronger, and industrial commodities are generally lower, while soft commodities (grains, sugar, cocoa, etc) are higher
- Revised GDP and Personal Consumption data are released at 8:30 am. Pending Home Sales will be released at 10 am, and the Fed’s Beige Book at 2 pm.