EM: Renminbi Weakness Persists Despite Chinese Property Support

EM: A quick round-up

Despite Chinese property-related stocks rallying on measures to support the sector, there seems no reason to expect a substantial reversal of renminbi weakness anytime soon. This should maintain the sluggish tone of Asian FX, although the Indonesia rupiah could out-perform as the low volatility environment continues to favour the carry trade.

In EMEA, the Bank of Israel meets today to set interest rates. Only 1 of 11 surveyed economists expect a 25bp hike. With USD/ILS trading at 3.80, however, the chances of a hike look under-priced. The highlight of the week should be the start of Poland's easing cycle on Wednesday. This looks to have been reasonably well-telegraphed and should not unduly weigh on the zloty.

In Latam, Chile is expected to follow up July's 100bp rate cut with another 75bp move. Latam real interest rates are all quite positive (especially if you use inflation expectations as the deflator for real rates), meaning that large rate cuts have not hit the currency. Those looking at the Brazil easing cycle will be taking notes on developments in Chile this week. Finally, we think the Mexican peso can hold onto gains despite Banxico's decision to unwind its forward book. 

Chris Turner