Foreign Exchange Consensus Forecasts is the result of a comprehensive monthly survey of over 250 prominent currency forecasters. Detailed coverage of the US dollar, the Japanese yen and the European euro every month along with Consensus Forecasts™ for 37 major currencies and analysis of 56 additional currencies.
Over 250 influential international and local economists polled.
Major currencies in the spotlight showing individual and average (mean) forex forecasts.
Cross rates against the euro and the yen Plus: Interest rates, Purchasing Power Parity estimates, historical data, long term forecasts, special surveys of forex risk assessments and currency trading ranges, charts and commentary.
About Us Established in London in 1989, Consensus Economics™ prepares monthly compilations of country economic forecasts and topical analyses covering the G-7 industrialised nations, Asia Pacific, Eastern Europe, Latin America that are published in its Consensus Forecasts™ publications, as well as specialised publications on Foreign Exchange forecasts and Energy and Metal price forecasts. Over the past two decades Consensus Economics has cultivated a growing network of economists, drawing upon the expertise of well-established local consultancies and large teams of professionals in the banks who are dedicated to particular countries and regions.
www.consensuseconomics.com
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Survey DateDecember 10, 2012
Every month, Foreign Exchange Consensus Forecasts surveys more than 250 financial and economicforecasters for their currency exchange rate projections. The results covering over 90 currencies –together with reference data and analysis of factors such as inflation, interest rates, balance of payments,government policies and politics – are rushed to subscribers by express mail and e-mail.
Currency Risk Assessments – A Special Survey
In order to gauge the risks of more significant swings in exchangerates than the consensus is currently predicting, we asked our pan-ellists to assign probabilities to a range of possible outcomes. Theresults, some of which show asymmetries of risk, are set out onpages 34 and 35.
OverviewPolitical events continue to take centre stage in the US, Europeand Japan and their uncertainties have led to shifts in the US dollar(page 3), the euro (page 4) and the Japanese yen (page 6). Theoutcome of upcoming debt negotiations, elections and policies onausterity, inflation and reforms will have a significant impact onhigh-yielding assets in 2013, as happened in 2012. Indeed, if theyear to date represented an accurate guide for full year perform-ance, the Argentinean peso (page 16) and the Brazilian real (page17) were particularly sensitive to financial volatility and reoccurringspikes in risk aversion. Each lost just over 10% of its value, as theglobal slowdown hurt exports and saw their economies pressuredby anaemic growth. Yet, despite having faced similar difficulties,the Mexican peso (page 21) rose 9.3% over the same period, as itbenefited from an upturn in investor confidence. Inflation in theeconomy is under control, its banking sector is seen as relativelywell capitalised and elections in July produced a more pro-busi-
See Since End Dec. 10 End Jan. End Mar. End Dec. to End
Page Dec. 2011 2012 2013 2013 2013 Dec. 2013
Summary: Foreign Exchange Consensus Forecasts
❒ ECB - European Central Bank e - consensus estimateGDP - Gross Domestic Product IMF - International Monetary FundM/S&P - Moody's and Standard & Poor's sovereign debt ratings na - not availablePPP - Purchasing Power Parity, see top of page 4 m-o-m - month-on-monthq-o-q - quarter-on-quarter y-o-y - year-on-year
❒ GDP is expressed in real (i.e. inflation-adjusted) terms. GDP and consumer prices are expressed as average percentagechanges over the previous year unless otherwise indicated. Measures of trade, current account and foreign exchangereserves (which exclude gold) are expresed as nominal amounts in US dollars (billion).
❒ Interpolated rates on pages 5-27 are calculated as period average or end period forecasts based on simplestraight-line interpolations from consensus forecasts.
❒ All individual foreign exchange forecasts on pages 5-15 are listed in descending order of their 1 year percentchange estimates. Consensus forecasts are averages of the named forecasters shown plus Other Forecasters.
DECEMBER 2012NOTES AND ABBREVIATIONS
Currency units per US$ orEuro, except the UK£, A$and Euro which are the
reciprocals.
(continued from front page)
Exchange rates vs. US$Australian Dollar (US$/A$) 17
ness government, which has underpinned the outlook for re-forms. The Chilean peso (featured in this month’s spotlighton page 14) is another currency in Latin America that hasachieved a near double-digit advance. It, too, is not immuneto swings in investor sentiment, although it has been wellsupported by internal demand and a resilient economy, whichexpanded 5.7% (y-o-y) in Q3. Furthermore, unlike some ofthe other countries in the region, its policymakers had re-frained from FX intervention to undermine the currency formuch of the year. Ironically, the Hungarian forint (page 12)has exceeded expectations as well, despite its weak eco-nomic performance and fragile fundamentals. Yet its advancecame mainly in the first seven months of 2012 and the inabil-
ity of the government to finalise a deal for financial aid fromthe IMF (partly due to its controversial bank tax plan) has ledto relatively wide swings since. In Asia, regional competitiveissues will remain a key theme in 2013, as countries jostlefor exports to a slowing group of Western economies. TheSingapore dollar (page 24) and the South Korean won (page25) have both risen by almost 7.0% in the year to date, com-pared with only 1.1% for the Chinese renminbi (page 18)and a decline of 5.6% for the Japanese yen (page 6), follow-ing its recent sharp correction.
In the spotlight this month we also feature the Canadiandollar (page 8) and the Thai baht (page 10).
US Interest Rates(Treasury bill and bond forecasts also on page 4)
UNITED STATES DOLLAR
The US$ is the principal benchmark currency against which the values of othercurrencies (except most Europeans) are measured throughout this publication. (For cross ratesand forecasts against the yen and euro see page 33.) The only exchange-traded index of theUS dollar's value is the NYBOT (composition below), which was originated by the Federal Reservein the early 1970s. Futures based on its ‘cash’ index (DXY) are traded on the New York CottonExchange. From the direction of trade statistics (below right) it will be noted that Canada has agreater weight in US trade than in the NYBOT index, while Mexico is not represented; the principalEuropean countries have a greater weight in the index than in US trade.
US$ INDEX: Monthly(Based on the NYBOT index weights below)
US: Risk Indicators%
Economic Indicators and Consensus Forecasts
US$ INDEX: Daily High, Low, Closing(Based on the NYBOT index weights above)
% of GDPConsensusForecasts
INDEX WEIGHTINGSEuro 57.6%Japanese yen 13.6%British pound 11.9%Canadian dollar 9.1%Swedish krona 4.2%Swiss franc 3.6%
Current AccountBalance
(% of GDP)
70.0
80.0
90.0
100.0
110.0
120.0
130.0
Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
0.0
2.0
4.0
6.0
8.0
Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
Long Term Rates - 10 Yr Treasury Bonds
Fiscal Cliff in FocusThe US dollar continues to move undera shadow of fiscal policy uncertainty,amid a deadlock in negotiations betweenthe White House and Congress to averta crisis before December 31. Each sideis aware of the profound implications animpasse for the dynamics of the Ameri-can economy in 2013. And investor sen-timent could deteriorate quickly in theevent of a stalemate, as happened dur-ing the debt ceiling fiasco in Q3 2011.Yet the Democrats and the Republicanswill have difficulty reaching compromisefrom entrenched positions. Most observ-ers expect the US Federal Reserve toannounce additional monetary stimuluson December 12, in order to keep Treas-ury rates anchored and to protect therecovery from potential fiscal issues. Un-certainties caused by ongoing politicalparalysis have caused our panel to lowerits GDP forecast for next year to below2.0%, from 2.2% in 2012. The medium-term debt outlook for US, though, maynot be as dire as some commentatorsfear. Shale gas production should beginto scale up, bringing with it compara-tive advantages for US industry and po-tential reductions in the trade and cur-rent account deficits.
US$ per Euro: Actual and Purchasing Power Parity Estimates
Euro zone Less US Interest Rate Differentials
The Purchasing Power Parity (PPP) theory asserts that, over the long-term, the trend ofan exchange rate is determined by cumulative differences in the national inflation ratesof the two countries concerned. We have estimated a long-term PPP trend by relatingthe average real exchange rate (1992-2011) to indices of producer price inflation in theUS and the euro zone over the same period. Figures for the euro prior to January 1999are 'synthetic' i.e. they have been calculated using a basket of the eleven originalmember currencies. The PPP line represents an approximation of the euro's long-runvalue, and a currency may be considered over- or under-valued if it is more than 10%above or below the PPP estimate. Our latest PPP estimate is US$1.25 per euro.
European Currency Union: The euro replaced indi-vidual currencies of the eleven original members inJanuary 1999. Greece adopted the euro at the start of2001, followed by Slovenia in 2007, Cyprus and Maltain 2008 and Slovakia in 2009. Estonia joined in Janu-ary 2011. The fixed exchange rates of euro membercountries are shown on the right.
Central Bank: The European Central Bank (ECB) isresponsible for monetary policy, which is set by acommittee drawn from EMU-members' central banks.Policy is carried out by a six-member executive board,currently headed by the Italian ECB president Mr.Mario Draghi (appointed in November 2011).
Fixed Conversions per Euro
Average % change
* Euro rates are synthetic prior to Jan. '99. 3mth Euribor and German 10-year bond yields thereafter.
%Euro and US$ Interest Rates
ConsensusForecasts
Swings in Euro SentimentAs has been the case for much of theyear, mid-to-late November support forthe euro lacked conviction. Efforts tocontain the debt crisis remain fragile andwere undermined by a lack of economicstrength. Greece secured the nexttranche of its rescue package from theEU and IMF late last month, drawing aline under immediate fears of a currencyunion exit. In addition, euro zone financeministers approved an aid deal for Span-ish banks, taking the heat off Madrid torequest a full-blown bailout. Yet boththese countries are heavily in recession(bottom box) and any sense of jubila-tion at their recent successes has beencurtailed by news of a possible storm inRome. Mario Monti became leader of atechnocrat Italian government in 2011,tasked with fixing the public finances andrestoring growth. However, he an-nounced his intention to stand down lastweek, after being unable to win crossparty support for broad reforms. Doubtsabout the commitment of the next ad-ministration to deficit reduction are re-flected in a renewed rise in Italian bondyields. The European Central Bank keptrates at 0.75% in early December, buthas hinted at more monetary easing inthe New Year in response to the spreadof economic and political uncertainty. Inan environment in which the peripheraleuro zone members are stuck in fiscalstraitjackets and the outlook for growthis dim, the euro will continue to be vul-nerable to periodic bouts of volatility.
Background Data (2011)
GDP Population GDP per(US$bn) (mn) Capita ($)
Consumer Price InflationConsensusForecasts
GDP Growth
* Forecasts from latest Consensus Forecasts – G-7 & Western Europe euro zone survey.
Average % change
(Libor)
(T-bill)1.5% 1.8%
1.8% 2.3%
(Continued on page 5)
(German)
Actual ---- Consensus -----Dec. 10 End Mar. 2013 End Dec. 2013
On the second Monday of everymonth we ask our panel to forecastspot rates for the US$ against the euroover a range of time horizons. The Con-sensus is the mean of all the forecastsreceived, including Other Forecasterspolled whose names do not appear.FECF then calculates the annual per-cent change and the discount (-) orpremium (+) of the consensus fore-cast to the survey date spot rate. Thequarter average and end quarter fig-ures shown below are based on a sim-ple straight line interpolation of con-sensus forecasts.
THE CONSENSUSSURVEY DATE SPOT
US$ per Euro: Daily High, Low, ClosingUS$ perEuro
%
US$bn
Yen per EuroYen/Euro Cross Rate
FORECASTS: US$ PER EURO
Currency Linkages: Independent float.The ECB aims to keep inflation ‘below butclose to 2%’ over the medium term.
Trading and Hedging Markets: The eurois the second largest forex market currencyafter the US$. US$/€ futures and options onfutures are traded on the Chicago Mercan-tile Exchange.
1.20
1.22
1.24
1.26
1.28
1.30
1.32
1.34
Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
ConsensusForecasts
* Excludes intra euro zone member transactions, ECB defintion.
94
96
98
100
102
104
106
108
J ul 2 12 A ug 9 12 S ep 18 12 Oc t 26 12 Dec 5 12
Current Account Balances Country Risk Indicators
(% of GDP) (% of GDP) (% of GDP) (Moody’s/S&P)Current Account Budget Balance Public Debt
YEN per US$: Actual and Purchasing Power Parity Estimates
JAPAN: Risk Indicators(% of GDP)
JAPANESE Less US Interest Rate Differentials%
%
The Purchasing Power Parity (PPP) theory of exchange rates asserts that, over thelong term, the trend of an exchange rate is determined by cumulative differences inthe inflation rates of the two countries concerned. In the above chart we have estimateda long term PPP trend by relating the real average exchange rate (1992-2011) toindices of producer price inflation in the US and Japan over the same period. The PPPline above represents an approximation of the yen's long run value, and a currencymay be considered over- or under-valued if it is more than 10% above or below thePPP estimate. On December 10, the Japanese yen was 3.1% above its recentlyestimated PPP of ¥79.8 per US$.
% of GDP
DIRECTION OF TRADE
2011 % ofEXPORTS TO: US$bn TotalChina 149.6 18.1USA 127.8 15.5South Korea 66.0 8.0Hong Kong 42.9 5.2Thailand 37.5 4.5Other 400.7 48.6
Yen SelloffThe yen lost 3.4% of its value betweenend-October and our December survey,as political uncertainty and concernsabout the independence of the Bank ofJapan (BoJ) took hold. Prime MinisterYoshihiko Noda had to call snap elec-tions (December 16) in return for parlia-mentary approval of a crucial deficit fi-nancing bill. And the leader of the mainopposition party who is likely to succeedhim has polarised opinion with his viewson foreign and monetary policies. In acontroversial campaign, he has adopteda tough stance towards a territorial dis-pute with China. In addition, his pledgefor ‘unlimited easing’ to end deflation isseen as extreme and unrealistic. Pres-sure on the BoJ to raise its target forinflation to above 1% and slash rates tozero (or below it, as in the case of Swit-zerland) is also not conducive to inde-pendence. Its current governor, MasaakiShirakawa, is viewed as an inflation-hawk who has resisted political demandsfor stimulus measures that might becounterproductive in the long-term. Yethe is due to retire in April 2013 and maybe replaced by someone more closelyaligned with the demands of the nextadministration. Add a stagnant economyto the mix (recent weak GDP outturns inthird box, left) and it is unsurprising thatthe yen has tumbled to a six month low.It is too early to tell whether politicalrhetoric will actually translate into policyaction, given the vested interests of adivided government. However, FX senti-ment has clearly deteriorated, with re-ports of an increase in short positionson the currency. In all, the consensus ispredicting that the yen will depreciate1.4% over the next 3-12 months.
On the second Monday of everymonth we ask our panel to forecastspot rates for the yen against the US$over a range of time horizons. The Con-sensus is the mean of all the forecastsreceived, including Other Forecasterspolled whose names do not appear.FECF then calculates the annual per-cent change and the discount (-) or pre-mium (+) of the consensus forecast tothe survey date spot rate. The quarterand annual average figures shown be-low are based on a simple straight lineinterpolation of consensus forecasts.
THE CONSENSUSSURVEY DATE SPOT
JAPANESE YEN per US$: Daily High, Low, ClosingYen per US$
Currency Unit: The currency is the yen (¥),which is divided into 100 sen.Central Bank: The Bank of Japan (BoJ) is re-sponsible for setting monetary policy. Mr.Masaaki Shirakawa was appointed as Gover-nor for a five year term in April 2008.Currency Linkages: The yen is an independ-ent floating currency, although the BoJ will in-tervene in consultation with the Ministry of Fi-nance in periods of disorderly market condi-tions or rapid FX change.Trading Markets: The yen is the third largestforex market currency after the US$ and theeuro, with unrestricted trading in spot and for-ward markets.Hedging Markets: ¥/US$ and ¥/euro futuresand options on futures traded on the ChicagoMercantile Exchange. ¥/US$ and ¥/euro optionsare offered by international commercial banks.Government: The Democratic Party of Japan(DJP) scored a landslide victory in the end-August 2009 parliamentary elections, winning308 out of the 480 seats. Yoshihiko Noda re-placed Naoto Kan as prime minister in lateAugust 2011. The DJP remains the largestpolitical party but lost its majority in the upperhouse in July 2010. Next parliamentary elec-tions on December 16, 2012.Debt ratings: Moody’s Aa3
Standard & Poor’s: AA-
Yen perEuro
77.0
78.0
79.0
80.0
81.0
82.0
83.0
84.0Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
94
96
98
100
102
104
106
108
Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
Economic Indicators and Consensus ForecastsNominal GDP (2011): US$5,869.4bn (¥468.4tn)Population (mid-2011): 126.5mn GDP per Capita: US$46,398
The Purchasing Power Parity (PPP) theory asserts that, over the long-term, the trendof an exchange rate is determined by cumulative differences in the national inflationrates of the two countries concerned. In the above chart we have estimated a longterm PPP trend by relating the average exchange rate (1992-2011) to indices ofproducer price inflation in the two countries over the same period. The PPP linerepresents an approximation of the Canadian dollar's correct long-run valuation, anda currency may be considered over- or under-valued if it is more than 10% above orbelow the PPP estimate. On December 10, the Canadian dollar was OVERVALUEDby 11%, compared with its recently estimated PPP of C$1.1 per US$.
C$ per US$: Actual and Purchasing Power Parity Estimates External HeadwindsThe C$ moved to a six-week high of0.99/US$ on December 10, havingtraded in a tight range close to parity formuch of November. Real GDP growthalmost stalled in Q3, registering a 0.1%(q-o-q) increase, with September's read-ing (measured by industry) coming in flatafter a 0.1% contraction in August. Thesluggish Q3 figure came on the back ofa decline in merchandise exports and a0.6% drop in business investment, itsfirst fall since Q2 2009. Household con-sumption, though, held up well and rose0.9%. In the current quarter, the manu-facturing PMI dropped from 51.4 in Oc-tober to 50.4 in November, suggestinganother soft performance. Quarterly es-timates from our sister publication, (Con-sensus Forecasts – G-7 & Western Eu-rope) indicate that Q3 represented atrough in the business cycle and thatoutput would begin to pick up by themiddle of next year. However, growth willdepend to an extent on events south ofthe border (page 3), as more than 70%of exports are destined to the US. TheBank of Canada held rates at 1.0% onDecember 4, even though inflation wasonly 1.2% (y-o-y) in each of the pastthree months. A reluctance to ease mon-etary policy is partly due to concernsabout household debt and asset bubbles.A small but positive rate differential withrespect to the US, coupled with a toptier sovereign rating and relatively highcommodity prices, is supportive of capi-tal inflows. Yet, despite expected weak-ness in the US$, the consensus is pre-dicting that the C$ will appreciate only0.2% over the next twelve months.
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
C$ per US$: Daily High, Low, Closing Yen/C$ Cross Rate
FORECAST: C$ PER US$SURVEY DATE SPOT
Interpolated RatesC$ per US$
Quarter EndAverage Quarter
On the second Monday of everymonth we ask our panel to forecastspot rates for the C$ against the US$over a range of time horizons. The Con-sensus is the mean of all the forecastsreceived, including Other Forecasterspolled whose names do not appear.FECF then calculates the annual per-cent change and the discount (-) or pre-mium (+) of this month's consensusforecast to the survey date spot rate.The interpolated quarter and annual av-erage figures shown below are basedon a simple straight line interpolationof consensus forecasts.
THE CONSENSUS
Currency Unit: The currency is the Canadiandollar (C$), which is subdivided into 100 cents.Central Bank: The Bank of Canada acts asthe lender of last resort and manages the pub-lic debt. Mr. Mark Carney is set to stand downas governor on June 1, 2013, to head the Bankof England. The term of office is seven years.Currency Linkages: The Canadian dollar isindependently floating. The USA is Canada’s big-gest trading partner and hence the relationshipwith the US dollar is particularly important.Trading and Hedging Markets: There are norestrictions on the buying/selling of foreign ex-change. Futures and options are traded on theChicago Mercantile Exchange (CME) and thePhiladelphia Stock Exchange.Government: The Prime Minister, Mr. StephenHarper, was re-elected on May 2, 2011 afterthe government collapsed in a vote of no confi-dence. The Conservative Party holds 164 ofthe 308 seats in the House of Commons. Nextelections by May 2016.Debt Ratings: Moody’s: Aaa
Standard & Poor’s: AAA
Yen perC$
0.96
0.98
1.00
1.02
1.04Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
THAI BAHT per US$: Actual and Purchasing Power Parity Estimates
THAILAND: Current Account and FX Reserves
%
The Purchasing Power Parity (PPP) theory asserts that, over the long term, the trendof an exchange rate is determined by cumulative differences in the inflation rates of thetwo countries concerned. In the above chart we have estimated a long term PPP trendby relating the average exchange rate (1992-2011) to indices of producer price inflationin the two countries over the same period. The PPP line above represents anapproximation of the Thai baht's correct long run valuation, and a currency may beconsidered over- or under-valued if it is more than 10% above or below the PPPestimate. On Dec 10, the Thai baht was OVERVALUED by 33% compared with itsrecently estimated PPP of Bt 40.8 per US$.
(US$bn)
ConsensusForecasts
THAI BAHT
Average Producer Price InflationThailand (2002-11) = 5.60%US (2002-11) = 2.82%
20
25
30
35
40
45
50
55Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
PPP EstimateBaht/US$
0
5
10
15
20
25
30
Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
Stable Currency OutlookDespite recent anti-government protestsin Bangkok, which were eerily reminis-cent of events two years ago, the bahtheld onto its advances against both theUS dollar and the Japanese yen. Sup-port came from a favourable outlook forforeign investment, including solidgrowth prospects and stable trends ininflation, which fell to 2.7% (y-o-y) in No-vember, from 4.2% a year earlier. True,the expansion in the Thai economy easedto 3.0% (y-o-y) in Q3, from 4.4% in Q2,negatively affected by a slowdown in ex-ports and global financial turbulence.(Headwinds from abroad were underlinedas a key risk to the recovery as the Bankof Thailand slashed interest rates to2.75% in mid-October.) Yet the Novem-ber demonstrations in the capital provedshort-lived and have not had a signifi-cant effect on economic output. In addi-tion, in a scenario in which downsiderisks in the US and Europe do not mate-rialise, panellists believe that monetarypolicy will be tightened more quickly inThailand than most other Asian coun-tries. Domestic demand, investment inparticular, has been buoyed by govern-ment reconstruction efforts and repairsto manufacturing supply chains, while arecent up-tick in sentiment in Chinashould add support to the external sec-tor. Growth in Q4 should be in doubledigits in year-on-year terms due to a lowbase of comparison caused by exten-sive flooding in parts of the country inlate 2011. In addition, the consensus ispredicting that it will average 4.4% nextyear, lower than that of China but dou-ble that of the US and higher than theAsia regional average.
% Thailand: Annual GDP Growth and Inflation(year-on-year)
On the second Monday of everymonth we ask our panel to forecastspot rates for the Thai baht against theUS$ over a range of time horizons. TheConsensus is the mean of all the fore-casts received, including Other Fore-casters polled whose names do not ap-pear. FECF then calculates the annualpercent change and the discount (-) orpremium (+) of this month's consen-sus forecast to the survey date spotrate. The interpolated quarter and an-nual average figures shown below arebased on a simple straight line inter-polation of consensus forecasts.
THE CONSENSUS
THAI BAHT per US$: Daily High, Low, Closing
SURVEY DATE SPOT
Yen/Baht Cross Rate
Interpolated RatesBahts per US Dollar
Quarter EndAverage Quarter
Yen per Bt
THAI BAHT
Currency Unit: The currency unit is the Thaibaht (Bt) which is divided into 100 satangs.Central Bank: The Bank of Thailand comesunder the supervision of the Ministry of Fi-nance. The current governor is Mr. PrasarnTrairatvorakul.Currency Linkages: In July 1997, the centralbank abandoned the baht's peg to a basket ofcurrencies in favour of a managed float.Trading and Hedging Markets: A two-tierforeign exchange market (onshore and off-shore) operated between late 2006 and early2008 due to restrictions on currency tradingby or with non-residents. The government hassince eased capital controls, allowing the dualexchange rate system to merge into one.Government: Ms Yingluck Shinawatra (sis-ter of former leader Thaksin) was elected asThailand's first female Prime Minister in July2011. She leads the Puea Thai Party (whichhas a parliamentary majority of 265 out of 500seats) and has formed a six party coalition.Next elections by 2015.Exchange Controls: There are now few for-mal exchange controls, except for licensingrequirements for some capital transactions.Debt Ratings: Moody's: Baa1
Standard and Poor's: BBB+
2.40
2.45
2.50
2.55
2.60
2.65
2.70
2.75
Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
30.0
30.5
31.0
31.5
32.0Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
RATE (Dec 10, 2012):
US$1 = Bht 30.68
Economic Indicators and Consensus ForecastsNominal GDP (2011): US345.6bn GDP per Capita: US$4,973 ConsensusPopulation (mid-2011) : 69.5mn Forecasts
Real GDP, %Consumer Prices, %Current Account, US$bnBaht/US$, annual averageShort Term Interest Rates1
Forex Reserves, end yr, US$bn1 3 mth interbank (%), end period. Forecasts for 3 and 12 months from survey date.
HUNGARIAN FORINTS per Euro: Actual and Purchasing Power Parity Estimates
HUNGARY: Current Account and FX Reserves
%
The Purchasing Power Parity (PPP) theory asserts that, over the long-term, the trendof an exchange rate is determined by cumulative differences in the inflation rates ofthe two countries concerned. In the above chart we have estimated a long-term PPPtrend by relating the average exchange rate (2002-2011) to indices of producer priceinflation in Hungary and the euro zone over the same period. The PPP line aboverepresents an approximation of the forint's long-run value, and a currency may beconsidered over- or under-valued if it is more than 10% above or below the PPPestimate. On December 10, the Hungarian forint was 1.1% below its recentlyestimated PPP of Hft280 per euro.
Deadlock in IMF Aid TalksThe forint traded at Hft283.2 per euroon December 10, similar to its level amonth ago, but it has experienced somevolatility in between. The recession inHungary has deepened during thecourse of 2012, as the economy shrankin quarter-on-quarter terms for the thirdconsecutive time. Growth fell 0.2% inQ3, exacerbated by a slump in agricul-tural output. Other sectors of theeconomy also fared poorly, including fi-nance and insurance, while industrialproduction dropped 3.8% (m-o-m) in Oc-tober alone (based on seasonal andworking day adjusted series). Householdconsumption fell 3.9% (y-o-y) in Q3,while gross capital formation plunged8.1%. The weak economic situation hasbeen blamed partly on the controversialpolicies of Prime Minister Viktor Orban,who is trying to keep the budget deficitbelow the 3.0% of GDP threshold re-quired for EU cohesion funding. In addi-tion, investor sentiment has been par-ticularly sensitive to a lack of progressbetween the government and IMF overa possible bailout loan, as the formerpressed ahead last week with companytaxes to close holes in its public financesagainst the advice of the latter. Hunga-ry’s credit rating was downgraded to BBby S&P last month, with the agencyputting an unpredictable business envi-ronment as a key reason behind themove. The National Bank slashed inter-est rates by 25 basis points – for thefourth consecutive month – to 6.0% inlate November, in an attempt to supportthe economy, which is expected to con-tract 1.3% in 2012 and barely grow in2013 (consensus forecasts).
* vs. synthetic euro prior to Jan. '99 Average Producer Price InflationHungary (2002-2011) = 3.76%Euro zone (2002-2011) = 2.39%
145
170
195
220
245
270
295
320Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
PPP Estimate
Forints/euro*
0
5
10
15
20
25
30
Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
On the second Monday of everymonth we ask our panel to forecastspot rates for the Hungarian forintagainst the euro over a range of timehorizons. The Consensus is the meanof all the forecasts received. FECFthen calculates the annual percentchange and the discount (-) or pre-mium (+) of this month's consensusforecast to the survey date spot rate.The interpolated quarter and annualaverage figures shown below arebased on a simple straight line inter-polation of consensus forecasts.
THE CONSENSUS
HUNGARIAN FORINTS per Euro: Daily, High, Low, Closing
Currency unit: The Hungarian forint is di-vided into 100 filler.Central Bank: The state-owned NationalBank of Hungary is responsible for imple-menting monetary policy. The governor isMr. András Simor.Currency Linkages: In February 2008, thehorizontal ERM-2 like trading range arrange-ment was abandoned in favour of a inde-pendent float. Medium term inflation targetof 3.0%.Trading and Hedging Markets: Hft/US$and Hft/euro futures and options on futureson the Chicago Mercantile Exchange (CME).Government: The president is Mr. JanosAder. Mr. Viktor Orban is the prime minister,whose Fidesz party secured 263 seats inthe 386 member parliament in April 2010.Next parliamentary and presidential elec-tions by 2014 and in 2017, respectively.Debt Ratings: Moody’s: Ba1
Standard & Poor’s: BB
SURVEY DATE SPOT
Interpolated RatesForints per Euro
Quarter EndAverage Quarter
270
275
280
285
290
295Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
205
215
225
235
245Jul 2 12 Aug 9 12 Sep 18 12 Oct 26 12 Dec 5 12
Forint/US$forecasts on
page 33.
RATE (Dec. 10, 2012):
Euro 1 = Hft 283.2End Jan. End Mar. End Dec. % change End Dec.
2013 2013 2013 from spot 2014
HSBC 278.4 275.0 270.0 4.9 na
Commerzbank 279.0 278.0 275.0 3.0 273.0
JP Morgan 290.0 290.0 275.0 3.0 na
Credit Agricole CIB 285.0 285.0 280.0 1.1 270.0
Credit Suisse 279.5 276.4 280.0 1.1 na
Morgan Stanley 278.2 275.0 285.0 -0.6 na
Oxford Economics 282.3 285.5 286.7 -1.2 279.8
BoA - Merrill Lynch 285.0 290.0 290.0 -2.3 300.0
Raiffeisen Research 295.0 300.0 290.0 -2.3 290.0
Vienna Institute - WIIW 290.0 290.0 290.0 -2.3 290.0
Economic Indicators and Consensus Forecasts Nov. 2012Nominal GDP (2011): US$139.7bn GDP per Capita: US$13,970 ConsensusPopulation (mid-2011): 10.0mn Forecasts
Real GDP, %Consumer Prices, %Current Account, US$bnForints/Euro, annual averageShort Term Interest Rates1
FX Reserves, end yr, US$bn1 90 day T-bills (%), end period. Forecasts for approx. 3 and 12 months from survey date.
CHILEAN PESOS per US$: Actual and Purchasing Power Parity Estimates
CHILE: Current Account and FX Reserves
The Purchasing Power Parity (PPP) theory of exchange rates asserts that, over the longterm, the trend of an exchange rate is determined by cumulative differences in theinflation rates of the two countries concerned. In the above chart we have estimated along term PPP trend by relating the average exchange rate (1992-2011) to indices ofproducer price inflation in the two countries over the same period. The PPP line aboverepresents an approximation of the Chilean peso's correct long run valuation, and acurrency may be considered over- or under-valued if it is more than 10% above or belowthe PPP estimate. On December 10, the Chilean peso was OVERVALUED by 46%compared with its recently estimated PPP of Ps693 per US$.
(US$bn)
CHILE: Inflation and Real Interest Rates%
Pesos/US$
US centsper pound
Average ProducerPrice InflationChile (2002-11) = 5.60%US (2002-11) = 2.82%
Slowdown ExpectedThe climb in the peso stalled after ittouched 470/US$ in late September andthe currency was held in a range nearPs480/US$ for much of November. Itsadvance, though, resumed in early De-cember, following news that the Chileaneconomy expanded by 5.7% (y-o-y) and1.4% (q-o-q) in Q3. Growth has beendriven mainly by strength in domesticdemand, with household consumptionand gross fixed investment up by 6.4%(y-o-y) and 13.3%, respectively. Ongo-ing headwinds from the US and Europe,though, suggest that that momentum willbe difficult to sustain. A quarterly tradedeficit of US$1.8bn was recorded in Q3,the first since Q4 2008, as imports out-stripped exports, while the current ac-count shortfall rose to US$4.8bn. Indus-trial production has also started to easein recent quarters, with a drop of 0.5%(y-o-y) in Q3 leading to concerns aboutpossible weakness ahead. Most observ-ers expect Chile to perform well in 2013and above the regional average, but ex-pand by less than the 5.3% estimatedin 2012. Inflation has fallen from the 4.0%levels registered at the start of the year,which has alleviated the urgency formonetary tightening. It dropped by 0.5%(m-o-m) in November, bringing the y-o-yfigure down to 2.1%, very close to thelower bound of the 2.0% to 4% targetrange set by the central bank. The bankheld rates at 5.0% at its latest meeting,citing the global uncertainty created bythe euro zone debt crisis and theupcoming ‘fiscal cliff’ in the US. On bal-ance, the consensus is predicting thatthe peso will depreciate 3.1% over thenext twelve months.
ConsensusForecasts
350
450
550
650
750
850Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
PPP Estimate
Pesos/US$
370
470
570
670
770Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
50
100
150
200
250
300
350
400
450
500
Pesos per US$(left scale)
Copper Price (right scale)
-2.0
2.0
6.0
10.0
14.0
18.0
Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
Consumer Price Inflation(% change on previous year)
On the second Monday of everymonth we ask our panel to forecastspot rates for the Chilean peso againstthe US$ over a range of time horizons.The Consensus is the mean of all theforecasts received. FECF then calcu-lates the annual percent change andthe discount (-) or premium (+) of thismonth's consensus forecast to the sur-vey date spot rate. The interpolatedquarter and annual average figuresshown below are based on a simplestraight line interpolation of consensusforecasts.
THE CONSENSUS
CHILEAN PESOS per US$: Daily Closing
SURVEY DATE SPOT
Currency Unit: The Chilean peso is subdividedinto 100 centavos.Central Bank: The Banco Central de Chile wasguaranteed independence in 1989. Mr. RodrigoVergara was appointed governor of the Cen-tral Bank in December 2011.Currency Linkages: Until September 1999,the peso was linked to a basket of currencies(80% US$, 15% euro and 5% yen) and thereference rate was adjusted in line with infla-tion differentials. Now the currency floats freely.Trading and Hedging Markets: There are twospot forex markets; an official market whichaccounts for 90% of transactions and an infor-mal market for other transactions. There is alsoa forward market, but currency derivativesmarkets are not well developed.Government: Mr. Sebastián Piñera waselected President for a four-year term in Janu-ary 2010. He leads a right-wing government.The Chamber of deputies (lower house) iselected for four-year terms and members ofthe senate (upper house) serve eight-yearterms. Next elections by 2013.Debt Ratings: Moody's: Aa3
End Jan. End Mar. End Dec. % change End Dec.2013 2013 2013 from spot 2014
Royal Bank of Canada 463.3 460.0 450.0 5.7 na
Morgan Stanley 480.0 470.0 475.0 0.1 455.0
General Motors 473.7 479.3 486.9 -2.3 506.5
Citigroup 482.0 484.0 490.0 -2.9 na
JP Morgan 470.0 470.0 490.0 -2.9 na
Bank of Nova Scotia 486.3 493.0 497.0 -4.3 510.0
Oxford Economics 481.2 486.9 499.8 -4.8 505.2
HSBC 490.0 495.0 500.0 -4.9 490.0
IHS Global Insight 486.0 494.8 510.3 -6.8 459.1
Deutsche Bank na 498.0 512.0 -7.1 na
CONSENSUS (Mean) 479.1 482.9 490.8 -3.1 487.1
Dec. Discount/Premium on Spot -0.7 -1.5 -3.1 -2.3
Nov Discount/Premium on Spot 0.3 -0.4 -2.4 -3.2
Oct. Discount/Premium on Spot -0.9 -1.5 -4.0 -3.7
Dec. High 463.3 460.0 450.0 455.0
Dec. Low 490.0 498.0 512.0 510.0
Dec. Standard Deviation 8.6 12.9 18.1 24.7
Economic Indicators and Consensus Forecasts Nov. 2012Nominal GDP (2011): US$248.6bn GDP per Capita: US$14,369 ConsensusPopulation (mid-2011) : 17.3mn Forecasts
Real GDP, %Consumer Prices, Dec/Dec, %Current Account, US$bnPesos/US$, annual averageShort Term Interest Rates1
FX Reserves, end yr, US$bn1 Real rate on 90-day central bank bills (%), end period. Forecasts for approximately 3 and12 months from latest survey.
Raiffeisen Research Rand Merchant Bank Roubini Global Economics
Royal Bank of Canada Royal Bank of Scotland Santander
Societe Generale Standard Bank Standard Chartered Bank
The Vienna Institute - WIIW UBS UniCredit
plus more than 200 other forecasters located in 27 countries.
% ChgePesos per US$ Consensus from ---- Range ----
of 9 F'csts Spot High Low
Interpolated Rates Pesos per US$Quarter EndAverage Quarter
ARGENTINIAN PESO
MAJOR CURRENCIES DECEMBER 2012
FORECASTERS
Policy: During 1991-2001, Argentina operated a ps1 = US$1 currencyboard system. In 2002, the government announced a devaluationand, later, floated the peso with strict exchange controls.
Outlook: Concerns about a sovereign debt default have underminedconfidence in the economy and exchange rate. In October a USfederal court barred Argentina from repaying creditors of restructuredbonds, unless it satisfied claims from holdout creditors. However, thecountry received a reprieve from a US appeals court in late Novem-ber, giving it more time to fight the earlier ruling.
2.83.03.23.43.63.84.04.24.44.64.85.05.25.4
Jan 06Jan 07 Jan 08Jan 09 Jan 10Jan 11 Jan 12
Pesos/US$
PPP Estimate (Latest: 5.30)
e = consensus estimate based on latest survey, except for FX reserves, which in some cases are latest available monthly data.
% Chge ForecastUS$ per A$ Consensus from ---- Range ---- See p.33 for cross rates of 34 F'csts Spot High Low
Interpolated Rates US$ per A$Quarter EndAverage Quarter
Policy: The A$ is free floating. Inflation target of 2% to 3%.
Outlook: The A$ has drifted higher in recent months, buoyed in partby signs of recovery in China and improving risk sentiment. Supportalso came from the out-performance of the Australian expansion,which slowed in Q3 but remained above 3% (y-o-y). Inflation roseto 2.0% (y-o-y) in Q3 and may increase following the carbon tax hikein July. However, the Reserve Bank slashed rates to 3.0% onDecember 3 in a bid to protect the recovery from external shocks anda slowdown in the mining sector.
AUSTRALIAN DOLLAR
MAJOR CURRENCIES
% Chge ForecastReals per US$ Consensus from ---- Range ----See p.33 for cross rates of 10 F'csts Spot High Low
Interpolated Rates Reals per US$Quarter EndAverage Quarter
Policy: Crawling peg was abandoned in 1999 in favour of a floatingexchange rate with inflation targeting. The tax on foreign fixed incomeinvestment was raised twice in October 2010, from 2% to 6%.
Outlook: A slowdown in the economy has weighed on the real,which slid 3.5% during November to 2.11/US$, its weakest level inmore than 3 years. Growth remained below 1.0% (y-o-y) in Q3, asincreases in public spending failed to revive investment. Govern-ment efforts to curb the strength in the currency and support themanufacturing sector have also contributed to its decline.
Policy: The C$ is independently floating. The USA is Canada'slargest trading partner, and hence the relationship with the US$ isof particular importance. Inflation target of 2%.
Outlook: See pages 8 and 9.
CANADIAN DOLLAR
BRAZILIAN REAL
% Chge ForecastC$ per US$ Consensus from ---- Range ----See p.33 for cross rates of 73 F'csts Spot High Low
Interpolated Rates C$ per US$Quarter EndAverage Quarter
Policy: The peso was linked to a fixed basket of currencies until late1999. It has since been allowed to float, with policy focused ontargeting core inflation (currently set at 3%).
Outlook: See pages 14 and 15.
% Chge ForecastPesos per US$ Consensus from ---- Range ---
of 10 F'csts Spot High Low
Interpolated Rates Pesos per US$Quarter EndAverage Quarter
CHILEAN PESO
Policy: A decade-long peg was dropped in 2005 in favour of amanaged trading band. The managed rise pattern has been re-placed by a freer floating band. (See chart for details).
Outlook: As expected, the climb in the renminbi (1.76% betweenSeptember and October) eased in November and early December.Critics partly attribute its loss of steam to a drop in political pressuresafter the US elections. However, its rapid appreciation would havebeen difficult to sustain amid a slowdown in reserve accumulationand lower trade and current account surpluses (as a % of GDP).
% Chge ForecastRenminbi per US$ Consensus from ---- Range ----- See p.33 for cross rates of 27 F'csts Spot High Low
Interpolated Rates Renminbi per US$Quarter EndAverage Quarter
COLOMBIAN PESO
CHINESE RENMINBI
% Chge ForecastPesos per US$ Consensus from ---- Range ----
of 9 F'csts Spot High Low
Interpolated Rates Pesos per US$Quarter EndAverage Quarter
Policy: Independently floating since 1999. Inflation targeting (set atbetween 2% and 4%) was part of the switch to a more flexibleexchange rate strategy.
Outlook: After trading close to Ps1818/US$ during much of Novem-ber, the Colombian peso rallied in early December. Growth in theeconomy has remained resilient, while annual inflation averaged3.1% (y-o-y) in Q3, a drop from 3.3% in Q2. Policymakers might havescope for further monetary easing in 2013, after an unexpected ratereduction to 4.5% late last month.
440
480
520
560
600
640
680
720
760
800
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Pesos/US$
PPP Estimate (Latest: 693.3)
5.605.806.00
6.206.40
6.606.807.007.20
7.407.607.808.008.20
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Rmb/US$
PPP Estimate (Latest: 5.74)
1700
1850
2000
2150
2300
2450
2600
2750
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Pesos/US$
PPP Estimate (Latest: 2207)
The daily rmb/US$ tradingband was widened from +/-
% Chge Forecast CzkKorunas per Euro Consensus from --- Range --- per
of 12 F'csts Spot High Low US$
Interpolated Rates Korunas per EuroQuarter EndAverage Quarter
CZECH KORUNA Policy: The koruna peg to a basket of currencies was abandoned inMay 1997 in favour of a managed float. Inflation targeting (currently2% with a band of +/-1%) was introduced in 1998.
Outlook: The slide in the koruna came to a halt in mid-November andthe currency has risen by around 1% since. Real GDP shrank for athird consecutive quarter in Q3, hit by government austerity meas-ures and weak demand. The National Bank is likely to hold rates ata record low 0.05% at its next meeting, despite a noticeableslowdown in inflation to 2.7% (y-o-y) last month.
Policy: The krone is linked to the euro via ERM-2, moving withinlimits of +/-2.25% around its central rate of Dkr7.46038/€. A referen-dum on euro appears unlikely anytime soon.
Outlook: The krone has retreated below 7.45 per euro in recentmonths, as Denmark adopted a negative deposit rate to countercapital inflows from investors fearful of turmoil in the euro zone.Growth of 0.1% (q-o-q) in Q3 enabled the economy to avoid atechnical recession, following a revised 0.7% contraction in Q2. Inyear-on-year terms, the economy shrank 0.5%.
DANISH KRONE % Chge Forecast Dkr
Kroners per Euro Consensus from --- Range --- perof 10 F'csts Spot High Low US$
Interpolated Rates (see page 2) Kroners per EuroQuarter EndAverage Quarter
23
24
25
26
27
28
29
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Korunas/Euro
PPP Estimate (Latest: 27.2)
7.2
7.3
7.4
7.5
7.6
7.7
7.8
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Kroners/Euro
PPP Estimate (Latest: 7.74)
Policy: Limits of HK$7.75 and HK$7.85 introduced around theHK$7.80 = US$1 peg in May 2005. Major FX regime changes seemunlikely until the renminbi (page 18) becomes fully convertible.
Outlook: The HK$ has remained near the limit of its two wayconvertibility band in recent months, obliging the Monetary Authorityto sell the currency each time it threatened to exceed its trading peg.Although monetary officials continue to reject calls for a review of theexchange rate regime, current policies have raised concerns aboutinflation, which was 3.8% (y-o-y) in October.
HONG KONG DOLLAR % Chge Forecast
HK$ per US$ Consensus from ---- Range ----- See p.33 for cross rates of 22 F'csts Spot High Low
Interpolated Rates HK$ per US$Quarter EndAverage Quarter
Policy: Until August 1997, the rupiah followed a crawling US$ pegsystem, with a 4% to 5% annual decline. It now operates under amanaged float. FX controls were tightened in late 2008.
Outlook: The downtrend in the rupiah has eased in recent months,as Bank Indonesia (backed by a large amount of FX reserves)intervened to stabilise it. Monetary officials have hinted at a tighten-ing of policy to curb inflation, which fell to 4.3% (y-o-y) in November,but may rise in 2013. The economy expanded 6.2% (y-o-y) in Q3, inline with the previous two quarters.
% Chge ForecastRupiah per US$ Consensus from ---- Range ----- See p.33 for cross rates of 25 F'csts Spot High Low
Interpolated Rates Rupiah per US$Quarter EndAverage Quarter
INDONESIAN RUPIAH
Policy: In February 2008, the horizontal ERM-2 like trading rangearrangement was abandoned in favour of a independent float.Medium term inflation target of 3%.
Outlook: See pages 12 and 13.
% Chge Forecast HftForints per Euro Consensus from --- Range --- per
of 11 F'csts Spot High Low US$
Interpolated Rates Forints per EuroQuarter EndAverage Quarter
HUNGARIAN FORINT
% Chge ForecastRupees per US$ Consensus from ---- Range ----- See p.33 for cross rates of 22 F'csts Spot High Low
Interpolated Rates Rupees per US$Quarter EndAverage Quarter
Policy: The Reserve Bank targets a stable real effective exchangerate. It intervenes to influence the rupee/US$ rate to offset US$movements against other trading partners' currencies.
Outlook: Uncertainties about the global economy and the imple-mentation of structural reforms have weighed on the rupee. Itsweakness in October and much of November also reflected highinflation and twin deficits, which have restricted growth. However,the currency strengthened last week after the government won a keyvote in parliament to open the retail sector to foreign investment.
Data & Forecasts* Population (mid-2011):1.2bnNominal GDP (2011): US$1909.6bn Debt Ratings (M/S&P):Baa3/BBB-
Consensus
Real GDP, %Consumer Prices, %Current Account, US$bnRupees/US$, annual avge.Short Term Interest Rates1
FX Reserves, end yr, US$bn* All data are for fiscal years beginning April 1 except rupees/US$ andforex reserves 1 91 day T-bill rate (%), fiscal year end. Forecasts for 3 and12 months from survey date.
% Chge Forecast ShekelShekels per US$ Consensus from --- Range --- per
of 12 F'csts Spot High Low Euro
Interpolated Rates Shekels per US$ Quarter End Average Quarter
MAJOR CURRENCIES
MEXICAN PESO% Chge Forecast
Pesos per US$ Consensus from ---- Range -----See p.33 for cross rates of 10 F'csts Spot High Low
Interpolated Rates Pesos per US$Quarter EndAverage Quarter
% Chge ForecastM$ per US$ Consensus from ---- Range ----- See p.33 for cross rates of 23 F'csts Spot High Low
Interpolated Rates M$ per US$Quarter EndAverage Quarter
Policy: Since the 1994 devaluation, Mexico has adopted a floatingexchange rate system with occasional intervention. Inflation targetingwas introduced in 2001 (currently 3% with a band of +/-1%).
Outlook: The peso has rallied in recent weeks, bouyed in part byoptimism about the economic outlook. The manufacturing PMI roseto 55.6 in November – its highest level since June – while new ordersrose in October at their fastest pace since May. Mr Enrique Pena Nietowas sworn in as Mexico’s new president on December 1, promisingto underpin economic growth and tackle crime.
MALAYSIAN RINGGIT Policy: Pegged to the US$ at M$3.80 between September 3, 1998and July 2005. The central bank has since adopted a managed floatwith exchange controls.
Outlook: Demand for ringgit denominated assets has strengthenedin recent weeks, following a positive GDP reading for Q3. Growth was5.2% (y-o-y), not far from the 5.3% average in the first half of 2012,while inflation of only 1.3% (y-o-y) in October – the same rate asSeptember – may reduce the urgency for Bank Negara Malaysia toraise rates (currently 3.0%).
2.9
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Ringgit/US$
PPP Estimate (Latest: 3.72)
10.0
11.0
12.0
13.0
14.0
15.0
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Pesos/US$
PPP Estimate (Latest: 12.9)
ISRAELI SHEKEL Policy: Inflation targeting was introduced in 1997, with an annualCPI price stability target range of 1% to 3%. The shekel has floatedindependently since 2004, with occasional FX intervention.
Outlook: The conflict in Gaza has hit growth in Israel through lostproductivity and the cost of military action. However, currency lossesduring the first half of November were reversed in the second half,with the shekel trading at 3.81/US$ at the end of the month. The Bankof Israel has held interest rates at 2.0%, after the 25bp cut in October,citing a lack of real inflation pressures.
Policy: The krone exchange rate is determined on the basis of supplyand demand in the FX market. Inflation targeting (currently set at2.5%) was introduced in 2001.
Outlook: Mainland GDP rose 0.7% (q-o-q) in Q3, mildly lower thanthe pace set in the previous two quarters. However, oil and gasproduction fell 7.7% (q-o-q) and when included in the total, GDPcontracted 0.8%. Exports fell 3.1 per cent in Q3, while imports wereup 1.1%. The Norges Bank held rates at 1.5% at its last meeting,citing low inflation, which stood at 1.1% (y-o-y) in October.
NORWEGIAN KRONE% Chge Forecast Nkr
Kroners per Euro Consensus from --- Range --- perof 25 F'csts Spot High Low US$
Interpolated Rates Kroners per EuroQuarter EndAverage Quarter
% Chge ForecastSoles per US$ Consensus from ---- Range ----
of 8 F'csts Spot High Low
Interpolated Rates Soles per US$Quarter EndAverage Quarter
Policy: The Peruvian sol is allowed to float independently. Since2001, the main objective of the central bank has been to maintainprice stability. Inflation target of 2% (with a band of +/-1%).
Outlook: The sol has drifted higher in recent week, driven by positivefundamentals. Peru expanded 6.5% (y-o-y) in Q3, compared with6.1% in Q1 and Q2, and is predicted to achieve a similar rate ofgrowth in 2013 (consensus), due to strength in internal demand.Gross fixed investment is forecast to increase 9.1% next year, froman estimated pace of 12.9% in 2012.
PERUVIAN SOL
7.2
7.4
7.6
7.8
8.0
8.2
8.4
8.6
8.8
9.0
9.2
9.4
9.6
9.8
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Kroners/Euro
PPP Estimate (Latest: 8.0)
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Soles/US$
PPP Estimate (Latest: 3.08)
% Chge ForecastUS$ per NZ$ Consensus from ---- Range ----- See p.33 for cross rates of 29 F'csts Spot High Low
Interpolated Rates US$ per NZ$Quarter EndAverage Quarter
Policy: The NZ$ floats freely, but the central bank monitors its tradeweighted value in setting monetary policy, with a view to keeping'near-term' inflation anchored near 2.0%.
Outlook: The NZ$ rallied late last week after the Reserve Bankdeclined to succumb to pressure for monetary easing and keptinterest rates unchanged at 2.5%. Hawkish statements from its newgovernor, Mr. Graeme Wheeler, also underlined his focus on infla-tion, which was only 0.8% (y-o-y) in Q3 but is forecast to graduallyincrease over the next 6-12 months.
Policy: Managed float. The euro became the sole reference rate inMarch 2003. Exchange controls regulate the sale of foreign currency.Four zeros were dropped from the leu in July 2005.
Outlook: The leu remained stable during much of November, butslipped a little in early December due to concerns about politicalrisks and its effect on reforms and financial support from the IMF.General elections over the weekend were won by the center-leftalliance of Prime Minister Victor Ponta, who is at odds with theconservative President Traian Basescu.
% Chge Forecast LeiLei per Euro Consensus from --- Range --- per
of 9 F'csts Spot High Low US$
Interpolated Rates Lei per EuroQuarter EndAverage Quarter
Policy: Until 2000 the zloty was pegged against a US$ and eurobasket. It has since been allowed to float. Inflation targeting intro-duced in 1999 (currently 2.5% with a band of +/-1%).
Outlook: The Polish zloty came under downward pressure in earlyDecember, as a loss of momentum in the economy raised theprospect of further monetary easing. Real GDP rose by only 1.9%(y-o-y) in Q3, down from 2.5% in Q2, while inflation fell to 3.4% inOctober, from 3.9% in September. The National Bank cut rates by25 basis points to 4.25% late last week.
% Chge Forecast ZlZlotys per Euro Consensus from --- Range --- per
of 12 F'csts Spot High Low US$
Interpolated Rates Zlotys per EuroQuarter EndAverage Quarter
POLISH ZLOTY
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.8
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Zlotys/Euro
PPP Estimate (Latest: 4.20)
3.0
3.4
3.8
4.2
4.6
5.0
5.4
Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12
Lei/Euro
PPP Estimate (Latest: 5.21)
Policy: The peso floats independently, although there are somerestrictions on currency sales in capital transactions and the centralbank frequently intervenes to stabilise the exchange rate.
Outlook: The peso has rallied in recent weeks, following an unex-pected surge in the economy. Real GDP rose 7.1% (y-o-y) in Q3,from a revised 6.0% in Q2, as domestic demand (household con-sumption and government spending) offset a slowdown in exports.The consensus for 2013 GDP growth has risen to 5.3% in our latestpoll, from an earlier estimate of 5.1%.
PHILIPPINE PESO% Chge Forecast
Pesos per US$ Consensus from ---- Range ----- See p.33 for cross rates of 12 F'csts Spot High Low
Interpolated Rates Pesos per US$Quarter EndAverage Quarter
% Chge Forecast RandRands per US$ Consensus from --- Range --- per
of 22 F'csts Spot High Low Euro
Interpolated Rates Rands per US$Quarter EndAverage Quarter
SOUTH AFRICAN RAND Policy: Since the abolition of the financial rand in 1995, the unifiedFX rate has been determined by market forces and exchange con-trols. Inflation targeting was introduced in 2000 (currently 3% to 6%).
Outlook: Growth fell to 1.2% (q-o-q annualised) in Q3, from 3.4% inQ2, as ongoing strikes in gold and platinum mines hit industrialoutput. The Reserve Bank kept rates unchanged at 5.0% late lastmonth to protect the rand from further weakness and due to concernsabout inflation, which rose to 5.6% (y-o-y) in October. Some observ-ers warn of possible stagnation in 2013.
% Chge ForecastS$ per US$ Consensus from ---- Range ----- See p.33 for cross rates of 24 F'csts Spot High Low
Interpolated Rates S$ per US$Quarter EndAverage Quarter
Policy: Free floating, but the S$ is monitored by the MonetaryAuthority of Singapore (MAS) against a trade-weighted basket. Theexchange rate is the main instrument used in controlling inflation.
Outlook: Early indicators suggest that the MAS will loosen monetarypolicy at its next bi-annual meeting in April 2013. Growth was barelyabove zero in year-on-year terms in Q3, hurt by the sluggish globaleconomy and lower demand for Singaporean exports. However, thedesire to stimulate output will be tempered by concerns aboutinflation, which was 4.0% (y-o-y) in October and could remainelevated due to food, fuel and wage increases.
SINGAPOREAN DOLLAR
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
S$/US$
PPP Estimate (Latest: 1.55)
5.5
6.5
7.5
8.5
9.5
10.5
Jan 06Jan 07Jan 08Jan 09Jan 10Jan 11Jan 12
Rand/US$
PPP Estimate (Latest: 8.86)
% Chge Forecast RblRoubles per US$ Consensus from --- Range --- per
of 10 F'csts Spot High Low Euro
Interpolated Rates Roubles per US$Quarter EndAverage Quarter
RUSSIAN ROUBLE Policy: Managed float with exchange controls. Russia introduced abasket (€0.45 and US$0.55) for tracking the rouble in 2005 and nowaims to keep it between a corridor of 32.45 and 37.45.
Outlook: The rouble has strengthened in recent week, buoyed inpart by plans to make local bond trading available to foreigninvestors. However, growth in the economy has slowed and areliance on oil makes it vulnerable to external shocks. The Bank ofRussia is expected to hold rates at 8.25% in the near term, as inflationrose to 6.0% (y-o-y) in Q3, from 3.9% in both Q1 and Q2.
Kronas per Euro Consensus from --- Range --- perof 30 F'csts Spot High Low US$
Interpolated Rates Kronas per EuroQuarter EndAverage Quarter
% Chge ForecastWon per US$ Consensus from ---- Range ----- See p.33 for cross rates of 20 F'csts Spot High Low
Interpolated Rates Won per US$Quarter EndAverage Quarter
Policy: Until late-1997, the exchange rate was allowed to fluctuatein a +/-10% band around the weighted average US$ exchange ratefrom the previous day's trading. The won now floats freely.
Outlook: The advance in the won slowed in November, as the Bankof Korea bought US dollars and warned of further action to halt a lossof competitiveness, especially in relation to the Japanese yen.Growth was revised down to 0.1% (q-o-q) in Q3, from 0.3% in Q2, andthe new president (to be elected on December 19) may be con-cerned by the uptrend in the currency.
SOUTH KOREAN WON
Policy: The Swedish krona floats independently. Primary focus ofmonetary policy is the inflation target (introduced in 1993 and cur-rently set at 2.0%).
Outlook: The krona drifted lower in November, as the slowdown inthe Swedish economy deepened. Real GDP rose 0.7% (y-o-y) and0.5% (q-o-q) in Q3, below the readings in Q2, while early indicatorsfor Q4 suggest further weakness in the export-dependent nation.The manufacturing PMI index rose a little to 43.2 in November, butremains deep in negative territory.
SWISS FRANC% Chge Forecast Swfr
Francs per Euro Consensus from --- Range --- perof 30 F'csts Spot High Low US$
Interpolated Rates Francs per EuroQuarter EndAverage Quarter
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan 06Jan 07 Jan 08Jan 09 Jan 10Jan 11 Jan 12
Francs/Euro
PPP Estimate (Latest: 1.26)
Policy: Until August 2011, the Swiss franc had floated independently.In September 2011, the National Bank introduced a ceiling oncurrency appreciation set at Sfr1.20 per euro (see graph).
Outlook: The move to negative deposit rates sent the Swiss francbelow Sfr1.21 per euro late November. However, it strengthened lastweek, due to risk aversion and global uncertainties. The NationalBank reiterated last month that it was “prepared to buy foreigncurrency in unlimited quantities” to defend the ceiling and protect theSwiss industry from a loss of competitiveness.
% Chge Forecast LiraLira per US$ Consensus from --- Range --- per
of 26 F'csts Spot High Low Euro
Interpolated Rates Lira per US$Quarter EndAverage Quarter
Policy: The crawling peg regime was abandoned in 2001, causinga sharp devaluation of the lira. The currency now floats independ-ently. Six zeroes were dropped from the lira in January 2005.
Outlook: The lira has remained between 1.76/US$ and 1.81/US$,but is susceptible to geo-political risks and financial shocks, due toa large Turkish current account deficit. Inflation, measured by CPI,fell to 6.37% (y-o-y) in November, from more than 10% earlier in2012. The monetary policy council voted for another reduction in thelending rate to 9.0% last month.
TURKISH LIRA
Policy: Managed float with intervention as required. The centralbank adopted an inflation targeting framework in 2000 (currenttarget of between 0.5% - 3.0%).
Outlook: See pages 10 and 11.
% Chge ForecastBaht per US$ Consensus from ---- Range ----- See p.33 for cross rates of 22 F'csts Spot High Low
Interpolated Rates Baht per US$Quarter EndAverage Quarter
THAI BAHT
Policy: Managed float. The central bank has intervened, sometimesheavily, in order to smooth fluctuations in the T$. A ban on foreigntime deposits was introduced in November 2009.
Outlook: Constrained by profit-taking and fear of FX intervention,the appreciation in the T$ has levelled-off in recent months. Theyear-long slowdown in the export-oriented economy passed atrough in Q3 as it expanded only 1.0% (y-o-y). However, the outlookfor the US and Europe remain uncertain and stability in the currencywill be important for the recovery in 2013.
TAIWANESE DOLLAR% Chge Forecast
T$ per US$ Consensus from ---- Range ----- See p.33 for cross rates of 19 F'csts Spot High Low
Interpolated Rates T$ per US$Quarter EndAverage Quarter
% Chge Forecast HrvHryvnia per US$ Consensus from --- Range --- per
of 8 F'csts Spot High Low Euro
Interpolated Rates Hryvnia per US$Quarter EndAverage Quarter
UNITED KINGDOM POUND Policy: The UK left the EU Exchange Rate Mechanism in September1992. Sterling now floats independently. Inflation target of 2.0%.
Outlook: The UK pound rose to US$1.61 in late November – a one-month high – buoyed in part by weakness in the dollar and news thatthe UK economy grew by 1.0% (q-o-q) in Q3. However, earlyindicators suggests that Q4 could disappoint. In his autumn state-ment, the Chancellor also admitted that it would take longer for thegovernment to curb national debt. Credit ratings agencies havewarned that the UK is at risk of losing its coveted 'AAA' status.
% Chge Forecast UK£US$ per UK£ Consensus from --- Range --- per
of 79 F'csts Spot High Low Euro
Interpolated Rates US$ per UK£Quarter EndAverage Quarter
MAJOR CURRENCIES
Policy: In 2003, FX trading was closed and draconian controls wereimposed. The bolivar has since suffered a series of devaluationsunder a pegged system. A two-tiered FX regime was introduced in2010 in a bid to support US$ oil earnings and curb inflation. In January2011, an anemic economy forced the government to eliminate thestronger rate of V2.6/US$ and leave the other unchanged at V4.3.
Outlook: In our special survey of currency risk assessments, theprobability attached to a devaluation of the bolivar of 20% or morein 2013 was 49.0% (see pages 34 and 35).
% Chge ForecastBolivars per US$ Consensus from ---- Range ----
of 8 F'csts Spot High Low
Interpolated Rates Bolivars per US$Quarter EndAverage Quarter
VENEZUELAN BOLIVAR
1.40
1.50
1.60
1.70
1.80
1.90
2.00
2.10
Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12
US$/Pound
PPP Estimate (Latest: 1.70)
1.50
2.50
3.50
4.50
5.50
6.50
Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12
Bolivars/US$ (official rate)
PPP Estimate (Latest: 5.83)
UKRAINIAN HRYVNIA Policy: Closely managed against the US$ with exchange controls todiscourage sharp movements.
Outlook: The downtrend in the hryvnia was briefly broken in mid-November, but the currency ended the month at levels close to thoseat the start. Political and economic uncertainty has increased afterthe Prime Minister Mr. Mykola Azarov and his cabinet resigned fromoffice on December 3. Some commentators suggest that it was dueto its failure to secure a new IMF loan and/or a discount on Russiangas supplies. Real GDP contracted 1.3% (y-o-y) in Q3.
Currency per US$ or euro, except the UK£,A$ and euro, which are the reciprocal.
The figures for 2012 and 2013 in the table below are based on consensus forecasts from our current survey. Figures for2014-2018 are taken from our October 2012 survey of long-term forecasts, in which we polled for panellists' end-yearforecasts and interpolated the results to obtain period averages.
In the tables below, we show spot and consensus forecast cross-rates for most of the major currencies. For the main Asia/Pacific currencies (below right) we show rates against the Japanese yen, Chinese renminbi and the US dollar. For theeastern and western European currencies (below) we show cross rates against both the euro and the US dollar. Thetriangular table (bottom left) shows cross rates between the G-7, Brazilian, Chinese and Mexican currencies. Latest ratesare those that prevailed at the close of trading on this month's survey date.
UK pound
Brazlianreal
vs US$ vs Euro
Eastern EuropeanConsensus Forecasts
Western EuropeanConsensus Forecasts
vs US$ vs Eurovs US$
The cross rate forecasts set out inthe triangular table below arecalculated as the amount of a
currency at the end of a row thatbuys one unit of the currency at the
head of the appropriate column.
G-7, Brazil, China and Mexico Cross Rate Consensus Forecasts
Russianrouble
Polishzloty
Hungarianforint
Czechkoruna
Swissfranc
Swedishkrona
Danishkrone
Asia/Pacific Consensus Forecasts
Malaysianringgit
New Zealanddollar
(US$ per NZ$)
SingaporeanDollar
South Korean won1
Taiwanesedollar
Thaibaht
Australiandollar
(US$ per A$)
vs renminbi (rmb per unit 1)
Hong Kongdollar
Norwegiankrone
Indianrupee
Indonesianrupiah1
Canadiandollar
US dollar
Euro
CROSS RATE FORECASTS
Chineserenminbi
vs Yen(¥ per unit 1)
Mexicanpeso
Japaneseyen
1 Currencies shaded in purpleabove (i.e. the Indonesian rupiah
and South Korean won) aremeasured as units per ¥ or rmb.
In addition to their central (most likely) forecasts, we askedour panellists for their estimates of the likelihood of alterna-tive rises or declines in certain major currencies over thenext twelve months. This analysis provides a measure ofthe risks attached to consensus central forecasts, and hasallowed us to compile some rough probability distributions
Depreciation vs US$+6% to +19%
Consensus Probability (%) of Currency Depreciation or Appreciation Against the US Dollar
+/- 5%-6% to -19%-20% or moreAppreciation vs US$Currency
Link +20% or more
Survey dateDecember 10, 2012
1 Probabilities are for appreciation/depreciation against the euro
Consensus forecasts are averages of individual panellists’predictions of how a currency is most likely to move over agiven time horizon, but most forecasters would also attachsome probability to various alternative outcomes or sce-narios. This special survey on ‘Currency Risk Assessments’is an attempt to quantify these uncertainties, using ourpanellists’ estimates to produce a number of consensusprobability or risk distributions. The usefulness of this ap-proach is clearly illustrated in the case of pegged or heavilymanaged currencies, like the Chinese renminbi and theVenezuelan bolivar. However, it can also be valuable foridentifying the direction of risk associated with currencyforecasts in countries where valuations are dependent to anextent on unclear global macroeconomic developments orgovernment policy actions. In Latin America, movements inthe Argentinian peso have been restricted by exchange
controls, which included a ban on US dollar purchases forsavings in mid-2012, to curb capital flight. Yet, as can beseen in the table above and chart on next page, highprobabilities are attached to a currency decline of between‘6 and 19%’ (28.8%) and ‘20% or more’ (40%) over the nexttwelve months. These figures partly underline concern thatArgentina might face another financial storm after a recentlegal challenge in the US by holdout creditors to its 2002crisis had raised the immediate threat of default (story onpage 16). Similar fears exist for Venezuela, due to its fragilebalance sheet and the re-election in October 2012 ofPresident Chavez, whose populist policies have under-mined foreign and domestic investment. A dependence onoil, endemic inflation and a lack of fiscal discipline do notbode well for stability in the currency, which has suffered aseries of devaluations over the past decade.
(see below). The charts on page 35 illustrate these 'riskdistributions' for nine of the currencies covered. Apprecia-tions or depreciations refer to changes in the currencyagainst the US dollar, e.g.-20% means a 20% rise in thenumber of currency units per US dollar (except for the UK£,the A$, NZ$ and the euro, which are the reciprocal).
Established in London in 1989, Consensus Economics prepares monthly compilations of country economicforecasts and topical analyses covering the G-7 Industrialised Nations, Asia Pacific, Eastern Europe andLatin America, as well as specialised publications on Foreign Exchange Forecasts and Energy and MetalPrice Forecasts. Over the past two decades Consensus Economics has cultivated a growing network ofeconomists, drawing upon the expertise of well-established local consultancies and large teams of professionalsin banks who are dedicated to particular countries and regions.
Foreign Exchange Consensus Forecasts® is available at US$798 or £498 or €728 for 12 monthly issues.
For prices and descriptions of all our publications and other regional products and services – including a rangeof electronic delivery options – visit our website: www.consensuseconomics.com, or contact us [email protected].