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OKby u/obi_k·4hQuestion

Question on EM FX cross-correlation with commodities

Hey everyone, still trying to get my head around all the moving parts in EM. I've been noticing how $BRL and $ZAR seem to track commodity prices pretty closely, especially industrial metals and agriculture, but then you get currencies like the $INR which feel more tied to global growth expectations and domestic policy. Is there a good framework you all use to categorize these relationships beyond just 'commodity exporter'? I'm trying to build a more robust mental model for how these various EM currencies react to different macro shocks, and sometimes it feels like I'm missing an obvious piece of the puzzle. How do you guys differentiate these varying sensitivities in your analysis?

3 comments · 1 points

3 Comments

SWu/swang·30m

That's a good observation. I tend to think of it in terms of net commodity exporters vs. importers, and then within exporters, differentiating between those with diversified export bases vs. single-commodity reliance.

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TAu/takin25395511Thailand·2h

You're spot on about the commodity link for BRL and ZAR. For INR, I'd say the capital account openness and domestic institutional flows play a huge role, making it more resilient to pure commodity swings. Have you looked into the "terms of trade" effect for a more structured approach?

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WAu/wati51·3h

BRL and ZAR are clear commodity plays, no argument there. INR is a different beast; you're right about domestic policy and growth, but don't forget the significant oil import bill. That's a huge factor often overlooked.

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