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Emerging-market investors are shifting their focus to local bonds and relative-value currency trades following election shocks that disrupted previous bets in major developing economies. Ashmore Plc and Ninety One are among the firms increasing their positions in local debt, particularly in frontier markets. Other investors are recommending currencies like the Polish zloty, which is seen as relatively insulated from political turbulence. Turkish assets are also becoming a favored bet due to the country's economic policy changes and investor-friendly officials. The search for new investment opportunities has intensified after recent election surprises, prompting investors to explore different trades and reduce exposure to emerging-market currencies. [Extracted from the article]

Emerging-market investors are shifting their focus to local bonds and relative-value currency trades following election shocks that disrupted previous bets in major emerging economies. Ashmore Plc and Ninety One are increasing their positions in local debt, particularly in frontier markets, while others are recommending currencies like the Polish zloty and Turkish assets. The search for new investment opportunities has intensified after recent election surprises, with some investors looking at Poland for its high carry and low political uncertainty. However, election uncertainty is not over, as investors also have to consider upcoming votes in the European Union, UK, and US. [Extracted from the article]

The expiration of a long-forgotten Brazil Treasury bond has prompted the country's central bank to intervene in the currency markets for the first time in nearly two years. The central bank is selling $1 billion in swaps to prevent a surge in volatility as these bonds come due on April 15. The bonds, which were sold in 1997 and never used again, will be wiped out from the market, leaving investors with a currency exposure that needs to be hedged. The central bank's currency position is already significant, and additional dollar sales may be necessary to maintain the value of the real. [Extracted from the article]

The article discusses the volatility of the Chilean peso in the foreign exchange market. While currency swings have decreased globally, the peso's volatility remains high compared to other Latin American currencies. Traders attribute this to the central bank's unpredictable interest rate cuts, which have undermined the carry trade in the peso. The central bank has declined to comment on the issue. Despite the volatility, some experts believe that Chile's stable fiscal situation and shrinking current account deficit will eventually lead to a decrease in implied volatility. [Extracted from the article]

The inverse relationship between emerging-market currencies and their volatility has broken down, causing traders to be trapped in losing positions. This is due to a lack of currency rallies despite low volatility. The impasse is caused by uncertainty about when the Federal Reserve will cut interest rates, which has frozen investors and reduced volatility. Carry trades, where investors borrow in low-interest-rate environments to buy assets with higher returns, are also performing poorly. Emerging currencies and their implied volatility have historically had a negative correlation, but this trend has reversed. Investors are now switching to funding with Swiss franc and Japanese yen and investing in dollar assets. Some emerging economies have started cutting rates, putting pressure on their currencies. However, bets on emerging-market debt are expected to work better when the US rate path becomes clearer. [Extracted from the article]

Read More: Oil Price Surge Upends Emerging-Market Disinflation Trade The Brazilian real's slump over the past seven sessions - 3.9% - is not even the biggest among developing nations. (Bloomberg) -- Emerging market currencies are on the brink of wiping out all the gains accumulated in 2023 as concerns about China's economy and US interest rates sour the mood with riskier assets. [Extracted from the article]

While Chile's peso and Peru's sol may weaken as rate cuts are imminent, other currencies "can still reach new highs before interest rates start to come down", he added. (Bloomberg) -- The world-beating rally in Latin American currencies this year is about to come up against a world-leading round of interest rate cuts. [Extracted from the article]

Bolsonaro is going to move forward with the spending policies to rally support in the election, "and that will translate into BRL weakness", said Brendan Mckenna, a currency strategist at Wells Fargo. (Bloomberg) -- Traders of Latin American currencies have fallen out of love with this year's star performer and shifted their focus northward. [Extracted from the article]

(Bloomberg) -- As the dust settles from Brazil's disappointing oil field auction, currency traders could be forgiven for wondering where the real is headed next. Brazil, meantime, may be pointed in the right direction after the government managed to finally overhaul its bloated pension system and the central bank slashed interest rates to zero. [Extracted from the article]