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How to Trade on Emerging-Market Central Bank Meetings
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Currency Blogger, CNBC.com
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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.
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" [TRY=X
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] 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.
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