Gains in two-year Treasury yields, which in May touched the highest since 2008, are probably limited given their spread above Fed Funds effective rate, according to AMP. Meanwhile, US President Donald Trump’s back-and-forth on Chinese trade has undermined his negotiating position, Naeimi said.
On Thursday, the Trump administration announced it’s imposing steel and aluminium duties on the European Union, Canada and Mexico, after refusing their calls for permanent exemptions.
Asian currencies such as the Indian rupee and Indonesian rupiah, which have been sold off, are favoured, according to Naeimi. Brazil’s real will benefit from stronger commodity prices as the global economy continues to grow, he said.
Even Malaysia, where the opposition is in charge for the first time in six decades, is enticing. “There’s political issues there, sure,” Naeimi said. “But the ringgit’s selloff is presenting opportunities.”
AMP is not alone holding a bullish view on emerging markets.
Morgan Stanley sees an opportunity for investors to go long the Korean won, rupiah, lira and Chilean peso, according to a note Thursday from strategists including Hans Redeker.
“The EM policy response to the USD rally, including rate hikes, fiscal measures, and intervention, has made EM FX relatively more attractive,” they said.