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How to Trade on Emerging-Market Central Bank Meetings

Monday, 17 Oct 2011 | 9:32 AM ET
Ian Mckinnell | Photographer's Choice RF | Getty Images

Emerging market central banks have a busy week ahead.

Here's how to trade on the upcoming meetings.

Brazil, Turkey, Thailand and the Philippines all have central bank meetings this week - which means there could be some interest-rate surprises in the offing.

"Lower than expected rates of growth" are leading a number of emerging market central banks to cut interest rates, says Andrew Busch, global currency and public policy strategist for BMO Capital. "They're not concerned about inflation at this point."

Brazil is the only country widely expected to cut rates this week, Busch says, "but here's the cool thing. Nobody thought Turkey would do it last time," and when they abruptly cut rates on October 4, it was a big surprise.

Andy's 101 Playbook
Also, the currency trade behind next week's central bank meetings, with CNBC's Melissa Lee and the Money In Motion traders.

So Busch wants to trade on the potential for another surprise rate cut.

'When we get this event to occur and Turkey cuts rates again surprisingly, I want to buy Turkish lira" when it declines against the dollar, he told CNBC's Melissa Lee.

Busch wants to buy the lira against the U.S. dollar at 1.8525 with a stop of 1.8725 and a target of 1.8025.

"It's a little nuanced, but what we're trying to take advantage of is the market going 'Oh, another surprise, they cut rates, that's back for the currency,' yet it's really good for risk-on and risk-on currencies should appreciate," he says.

You can watch the whole discussion on the videotape.

left/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__ICONS/icon_story_360_TV.gif1505000lefttruehttp://msnbcmedia.msn.comCNBC 360 TVfalse1PfalsefalsefalsefalseCNBC TVTune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at moneyinmotion@cnbc.com.

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