The ongoing decline in U.S. real interest rates suggests that EM currencies should continue to outperform in total return terms, and we remain bullish on the WisdomTree Emerging Currency ETF. After turning bullish on April 2 the index has risen 7% and we believe the rally may be just getting started given the strong gains seen in…
The Brazilian real is trading close to valuation levels seen when the economy was saddled with external debt and faced imminent threat of default in 2000. In 2000 central bank reserves amounted to less than half of general government external debt while the current figure is over four times. The deeply undervalued currency and stable…
Intro: Does currency weakness cause inflation or does inflation cause currency weakness? While it may appear that currency weakness causes inflation, the opposite is true. Declining export competitiveness and falling real interest rates resulting from higher inflation necessitate currency weakness. Contrary to economic theory, higher inflation prints can sometimes lead to short-term currency appreciation in…