Currency shifting sands

There is no change in our currency forecasts. But the way they’ll happen has shifted. Our biggest shorts remain EM currencies. We stay short euro versus US dollar with a target of parity. The yen is trickier. We have a long position against Asian EM currencies, with a focus on Renminbi depreciation. That means risk–off drives the yen a bit higher as a safe-haven currency. But that contains the seeds of its own undoing as the deflationary impact would force the BoJ to act. We’ve added Indian rupee shorts as a direct replacement for the Indonesian rupiah. We also add a short Polish zloty to the book.

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