Global Macro Analysis 19th October

The major macro themes of interest are:

i. the beginning and pace of the tightening cycle in the US.

ii. the expansion of ECB's balance sheet and reflation of Euro area.

iii. the Bank of Japan's QE.

iv. Chinese Economic Status

v. QE programs Supply issues

v. Greek –EU tensions / Elections

vi. Oil Prices

vii. Russian - Ukraine Crisis

viii. Middle Eastern Tensions

ix. UK’s Brexit? Jeremy Corbyn!

x. Iran Agreement

xi. Emerging Markets Turmoil

xii. US Elections 2016

Dollar demand from companies puts pressure on local currencies

Emerging Nations Trimming $5 Trillion Debt Stokes Currency Risk

Borrowers in emerging markets have started to address a $5 trillion mountain of dollar-denominated bonds and loans, reducing their obligations for the first time in seven years in a move that threatens to cut short a budding rally in currencies from Brazil to Malaysia.

Companies in developing nations paid back $38 billion of dollar debt last quarter, $3 billion more than they borrowed in the period and marking the first reduction in net issuance since 2008, according to data compiled by Bloomberg. Demand for greenbacks among borrowers needing the currency to repay debt is contributing to the largest capital outflows in almost three decades.

The borrowing binge, which took off in the wake of the global financial crisis as interest rates tumbled, may now be reversing as economic growth slows, commodity prices fall and lenders demand higher yields. While developing-nation currencies are rebounding from their record lows, analysts surveyed by Bloomberg expect the depreciation trend to resume as dollar debt repayments accelerate.