hi guys,
It's really cool someone started this thread. I actually trade these what you call "exotics" for a living, at the fund I manage capital for - would say I focus 70% of my time on these EMs and 30% on G10.
Just a side note, be very careful how your broker treats these. I have Interactive Brokers for some of my personal finances and it's quite a bit of a disaster how they treat these. In terms of carry / interest rate differentials / swap process it's a complete joke - you wouldn't receive any money for being short e.g. USDTRY unless your position is above USD 10mio, in which case they roll your positions on the interbank market. For example, if I am short USDTRY in my fund / on the institutional / interbank level I am getting paid apx. 25% per annum. That is because the forwards for USDTRY are much higher than spot price (because of inflation & interest rates differentials) hence you get these 25% if you remain short for a year and keep rolling down your forwards as time goes by. In that way, you would only lose money if USDTRY spot moves higher by more than 25% during that 1 year period. On the retail side though (and I assume most other brokers are the same or worse than IB) they pay you 0% carry for being short USDTRY and you would have to pay apx. 30% annual carry to be long USDTRY. So the only way to trade these currencies on the retail side is pretty much intraday - but that is a very difficult proposition as the bid / offer spreads are wider than on the G10 side which means you need a greater edge to remain consistently profitable. How are the brokers you are using treating these?
This week you've got a lot of events on these pairs, I am thinking USDEM will try to trade lower in the first half of the week. You have Brazil elections (with Bolsonaro likely a winner - market positive), Mexico City airport consultation / referendum - approval would be positive, but even if it comes out as negative -> event is out of the way, risk premia gets de-priced and USDMXN can trade lower in a corrective move. USDTRY remains very heavy in spite of overall global risk trading weak, and would expect that one to continue. USDZAR is a buy on dips I think - also TRYZAR demand / buying flow make ZAR risk trade on a backfoot. USDRUB lower bias too at the moment - some positive noise going on with Bolton visit to Russia, there are plans for Putin / Trump meeting in Paris and there might be a larger deal coming into place potentially including Syria and Ukraine, while at the same time further sanctions seem to be well priced in (with a potential to actually surprise and get much lighter sanctions than initially feared). This is for short term, medium term I am looking for buying opportunities as I think EMs will trade weakish into mid-January.
Cheers,
The Real Trader
It's really cool someone started this thread. I actually trade these what you call "exotics" for a living, at the fund I manage capital for - would say I focus 70% of my time on these EMs and 30% on G10.
Just a side note, be very careful how your broker treats these. I have Interactive Brokers for some of my personal finances and it's quite a bit of a disaster how they treat these. In terms of carry / interest rate differentials / swap process it's a complete joke - you wouldn't receive any money for being short e.g. USDTRY unless your position is above USD 10mio, in which case they roll your positions on the interbank market. For example, if I am short USDTRY in my fund / on the institutional / interbank level I am getting paid apx. 25% per annum. That is because the forwards for USDTRY are much higher than spot price (because of inflation & interest rates differentials) hence you get these 25% if you remain short for a year and keep rolling down your forwards as time goes by. In that way, you would only lose money if USDTRY spot moves higher by more than 25% during that 1 year period. On the retail side though (and I assume most other brokers are the same or worse than IB) they pay you 0% carry for being short USDTRY and you would have to pay apx. 30% annual carry to be long USDTRY. So the only way to trade these currencies on the retail side is pretty much intraday - but that is a very difficult proposition as the bid / offer spreads are wider than on the G10 side which means you need a greater edge to remain consistently profitable. How are the brokers you are using treating these?
This week you've got a lot of events on these pairs, I am thinking USDEM will try to trade lower in the first half of the week. You have Brazil elections (with Bolsonaro likely a winner - market positive), Mexico City airport consultation / referendum - approval would be positive, but even if it comes out as negative -> event is out of the way, risk premia gets de-priced and USDMXN can trade lower in a corrective move. USDTRY remains very heavy in spite of overall global risk trading weak, and would expect that one to continue. USDZAR is a buy on dips I think - also TRYZAR demand / buying flow make ZAR risk trade on a backfoot. USDRUB lower bias too at the moment - some positive noise going on with Bolton visit to Russia, there are plans for Putin / Trump meeting in Paris and there might be a larger deal coming into place potentially including Syria and Ukraine, while at the same time further sanctions seem to be well priced in (with a potential to actually surprise and get much lighter sanctions than initially feared). This is for short term, medium term I am looking for buying opportunities as I think EMs will trade weakish into mid-January.
Cheers,
The Real Trader
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2
From 8pm until 6-7am London time it's practically untradeable as nobody is quoting it on the interbank.
but the 2 sells got it back 
