The Emerging Markets U.S. Election Play

Emerging markets currencies tend to trade together - they float higher when global economies gather steam and drift lower when there is an economic slowdown. Recently, some emerging markets currencies have headed in the opposite direction - and some in the financial markets peg that to the U.S. presidential election.

The reason? Some are betting that Joe Biden will become the next president and how such an election outcome would impact some emerging market countries. For example, countries that have felt the wrath of President Trump's trade tirades (South Korea, Mexico and China, to name a few) have seen their currencies strengthen against the dollar in the past couple of months (the notion is that Biden would unwind some of the Trump trade practices). Countries that benefitted from the U.S./China trade war(s) in particular (like Argentina, Chile or Malaysia) have seen a weakening of their currencies against the dollar over that same time period (same reason as above).

Countries who have been bad actors but got a pass from President Trump (Russia and Turkey) have seen their currencies get hit hard (the assumption is that Biden and the democrats would not be as favorable).

Excalibur Pro can help you monitor the relationships between these emerging markets currencies and help you learn when the more traditional relationships between them start to return. In the meantime, you can start to pencil in some correlation trades. Or, bet that the markets have it wrong - and President Trump gets re-elected. Again, Excalibur Pro can help you understand what those correlation relationships were before the U.S. election heated up by allowing you to go back in time and see correlation relationships (six months of history) from whatever date you select over the past 10 years.