Picking Winners Among The G10 High-Beta Currencies

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The global recovery and the fading of China- and EMU-related risks should boost G10 high-beta FX.

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High-beta currencies have diverged since October, largely reflecting shifts in market pricing relative to fundamentals, rather than trends in fundamentals alone. The divergence creates some scope for catch-up by the laggards NZD, NOK and SEK.

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CAD appears rich relative to its high-frequency drivers, while the other G10 high-beta currencies are somewhat cheap.

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Near-term divergence likely will reflect more shifts in policy expectations. A late-May shift in RBNZ rhetoric could deal a body blow to NZD.

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The BoC’s April policy report should lay the ground work for rate hikes in 2H, supporting CAD.

ENDS