Salient to Investors:
For the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the yuan has depreciated more than in any other period since its 1994 devaluation.
Investors are fleeing the BRICs, after Brazil’s consumer default rate rose to the highest level since 2009, prices for Russian oil exports fell to an 18-month low, India’s budget deficit widened and Chinese home prices slumped.
Lloyd Blankfein said the BRICs are still strong enough to account for 80 percent of growth at Goldman Sachs.
Warren Hyland at Schroder Investment Management is buying ruble bonds of Russian companies, saying weaker currencies will stimulate economic expansion by making exports more competitive.
Stephen Jen at SLJ Macro Partners is bearish, saying a slowing of the global economy and capital flow will expose many problems in the BRICs. He expects BRI currencies to decline at least 15 percent further by end of 2012.
John Taylor at FX Concepts said all the BRICs looked ugly, and predicted the real and ruble will suffer fairly decent declines later this year as a global recession spurs investors to buy dollars as a haven.
Derivatives traders see no sign of a turnaround.
Option traders are the most bearish on the ruble since October and they expect price swings in the rupee to be the biggest in Asia.
Amit Rajpal at Marshall Wace expects a surge in bad loans in Brazil to weaken the real further, and a full-blown credit problem, resembling the collapse of the U.S. subprime mortgage market in 2007.
Eric Fine at Van Eck Global said investors are still too bullish on assets in the BRICs as Europe’s debt crisis weighs on emerging economies.