It's time for Leg 2 of the USD Wrecking Ball World Tour!
This is a great summary of relative CB hawkishness. Let's see how the currencies of countries with POSITIVE REAL RATES are faring against USD.
This is a great summary of relative CB hawkishness. Let's see how the currencies of countries with POSITIVE REAL RATES are faring against USD.
Let's just tackle the elephant in the room first this time and look at CNY.
DESPITE achieving 2.1% real rates, the CNY has only retraced 1/3 of its weakening against USD since Q1. And that's with PBOC intervening AGAINST USD despite imploding exports.
DESPITE achieving 2.1% real rates, the CNY has only retraced 1/3 of its weakening against USD since Q1. And that's with PBOC intervening AGAINST USD despite imploding exports.
Imho, that's a tell on how scared Xi is about importing Inflation and what that does to an already restive population.
Not going to spend much time on HKD (3% real rates) and SAR (2% real rates) because they are managed USD-pegs, but here are the charts regardless.
Indian Rupee INR is next, having achieved 0.4% real rates. Oops.
Onto our neighbor to the south, Mexico MXN. USD has weakened somewhat throughout 2022, but it's obviously within a much bigger USD strengthening trend.
Finally, we get to the Brazilian Real BRL, which despite having achieved a whopping 7.9% real rate, has done precisely JACK against the USD Wrecking Ball.
This short tour was really just to show you that there are ENDOGENOUS factors that lend strength to the USD despite CYCLICAL factors that wax and wane.
I am working on a thread that explores this theme in a bit more detail. Stay tuned!
I am working on a thread that explores this theme in a bit more detail. Stay tuned!
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