Emerging markets offer exotic exchange

摘要

These are exotic times for foreign-exchange traders. Eastern Europe offers a range of apparently one-way convergence bets with the euro, while liquidity is flowing into such supposedly exotic alternatives as the South African rand, the Brazilian real and lately, the Chilean peso. Will the trend continue, and if so, what's the best way to play it? Convergence looks easy. Ulrich Leuchtmann, FX manager at Invesco Asset Management, says: "Bonds in those currencies hoping to join European monetary union will have to come to eurozone yield levels; therefore, a lot of positive price actions will have to come sooner or later. Also, the currencies will have to appreciate to get [retail and other] prices to EU levels." The alternative to currency appreciation would be inflation, but, as Mr Leuchtmann says, "they won't want that after the high inflation of the 1990s".