"The fact that it's a highly contested election makes it very difficult to trade these markets," says Flavia Cattan-Naslausky of RBS. An Obama win would be seen as a continuation of the status quo, and likely would lead to better stock markets and a weaker bias for the dollar, she says. In that case, RBS likes going short USD/MXN. A Romney win would lend to a stronger dollar, but is trickier for trading EM forex, she says. Broad consensus is that Romney would appoint a less-dovish Fed chief. RBS likes going long USD/JPY with a Romney victory. Dollar strength could eventually lead to some buying opportunities for EM currencies, but the safest bet would be buying them against the euro, she adds. EM forex is a bit stronger today, with USD/MXN down 0.4% at 12.9887.
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