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#IGForexChat: What does the next year hold for emerging market currencies?

On Thursday 1 November, we invited two forex experts into the IG studio to discuss what the coming year holds for emerging market (EM) currencies. Victoria Scholar sat down with trader Paul Bratby and financial market analyst Raj Dhall. Their conversation touched on many topics related to the emerging currencies market, including Turkey’s pledge to balance their economy, as well as the rise in the Brazilian real against the US dollar following president-elect Bolsonaro’s political campaign.

Is the current volatility in emerging market currencies a warning sign or an opportunity?

Raj Dhall (1 min 41 sec): I think it’s an opportunity to be honest. I think [US President Doland] Trump has been putting tariffs on Turkey and all of these emerging market currencies are dropping like flies. With that being said, I think it represents an opportunity as we have these upcoming elections [in America] to the House and the Senate, so I think we could have some complications there.

Adding to this, we’re finally seeing some yield over in the States so maybe the interest rates rising there has meant that some people are using it as a safe haven.

Paul Bratby (2 min 28 sec): I think we’re almost at the support levels that we need but we also need some stimulus. We need the US dollar to weaken and it will take quite a few things for that to happen.

Oil will need to rise, Trump and China will have to put their big-boy pants on and start to reach an agreement, and the dollar will start to weaken. That will help those emerging market currencies start to gain a bit of strength.

Is Turkey going against its pledge to balance the economy?

Victoria Scholar: Tax cuts in Turkey have been putting pressure on its lira amid concerns about its fiscal position. Raj, what’s your view? Do these tax cuts go against Turkey’s finance minister, Berat Albayrak’s, pledge to balance the economy?

Raj Dhall (11 min 27 sec): I think it’s a very difficult situation with the central bank versus the government and I think the tax cuts are causing problems. Does it feel like it’s a good thing to do right now? My answer’s no. I don’t think tax cuts are the way forward, I think that’s slightly irresponsible.

Paul Bratby: It also shows desperation.

Raj Dhall: Desperation as well, you could look at it like that. On the other side of things, having 24% inflation is crazy. We’re not used to seeing or feeling anything like that in this country and the prices on goods like food and oil aren’t sustainable for the people. They have to be seen to be doing something so that they can stay in power.

Following the recent upward trend, is the Brazilian real one to watch following the campaign of president-elect Bolsonaro?

Paul Bratby (16 min 49 sec): Well I think the trend [a 5% rise against the US dollar in October 2018] is over now. Following the election, it has pulled back quite dramatically. The election acted as a catalyst but all of a sudden that bullish trend is over, and we could be in a bearish correction.

Get more insights from the #IGForexChat

If you’d like to find out more about what the coming 12 months hold for the emerging currencies market, watch the full interview, or choose an area that interests you:

  • Is current emerging market currency volatility a warning sign or an opportunity? (1 min 41 sec)
  • How do you handle the challenges of trading forex in a basket? (3 min 2 sec)
  • Is the return to the greenback responsible for the current volatility in the emerging currencies market? (4 min 55 sec)
  • How could the US midterms affect EM currencies in the coming months? (6 min 20 sec)
  • What damage could a flattened US yield curve do to EM currencies? (7 min 53 sec)
  • What are the troubles currently facing the Turkish lira? (9 min 21 sec)
  • Can the Turkish central bank truly be independent? (12 min 22 sec)
  • How viable is the Turkish lira as a forex trade? (13 min 2 sec)
  • Is the Brazilian real one to watch out for following president-elect Bolsonaro’s electoral victory? (16 min 46 sec)
  • Following a bailout, is the Argentinian peso in ‘reprieve mode'? (19 min 55 sec)

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