FxWirePro: ZAR remains laggard among EMFX - Options trade perspectives to keep risk of FX jolts on check

In CEEMEA, the ZAR remains the chief laggard, fiscal concerns coming to the fore and taking EURZAR higher for a fourth consecutive week. EURZAR has risen in 7 of the last 8 months, more often than not on political worries.

Thus, we advocate selling ZAR vs a 50:50 USD:EUR basket. Stopped out in COP vs CLP; stay short EURHUF through a 6m seagull.

We were stopped out of a long COP position despite the continued bullish action in oil, a specific illustration of a general dislocation between petro-currencies and the oil price.

We continue to hold a bullish position in HUF on the policy contradictions facing the NBH, while our EM strategists have added an outright short in ZAR against a 50:50 EURUSD basket.

In their view, the market is too optimistic that sovereign ratings downgrades will be postponed and/or the outcome of the ANC’s December elective conference deliver any structural policy relief.

They estimate that sovereign downgrades by both S&P and Moody’s would trigger about $5bn-$7bn of forced outflows.

Sell ZAR vs an equally weighted basket of EUR and USD. Enter 15.2740, review level 15.00, target 16.10.

Sold CLPCOP at 4.73 on October 19th. Stopped out at -1.37%.

Long a 6m EURHUF put spread (strikes 304297), short a 6m 312 call.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 37 levels (which is mildly bullish) while articulating (at 11:00 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

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