FOREIGN EXCHANGE - Putting the Pieces Back Together - Brown Brothers Harriman
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FOREIGN
EXCHANGE
O U T LO O K F O R F I R S T Q UA R T E R 2 0 21
Putting
the Pieces
Back
Together
FOREIGNEXCHANGE Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries. This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. Pursuant to information regarding the provision of applicable services or products by BBH, please note the following: Brown Brothers Harriman Fund Administration Services (Ireland) Limited and Brown Brothers Harriman Trustee Services (Ireland) Limited are regulated by the Central Bank of Ireland, Brown Brothers Harriman Investor Services Limited is authorised and regulated by the Financial Conduct Authority, Brown Brothers Harriman (Luxembourg) S.C.A. is regulated by the Commission de Surveillance du Secteur Financier. All trademarks and service marks included are the property of BBH or their respective owners. © Brown Brothers Harriman & Co. 2021. All rights reserved. IS-06943-2021-01-13 BBH Foreign Exchange 2021 First Quarter Outlook
CONTENTS
2 MAJOR MARKET GLOBAL OVERVIEW
6 EMERGING MARKETS
9 CURRENCY FORECASTS
BBH Foreign Exchange 2021 First Quarter Outlook | 1
Major Market
Global Overview
In many ways, the outlook is relatively consistent with last quarter. Countries around the world
continue to fight the virus with lockdowns even as the vaccine rollout advances. Despite the ongoing risks,
markets have priced in stronger global growth this year coupled with easy monetary and fiscal policies.
This is the perfect cocktail for risk assets. Indeed, we believe the Blue Wave trade is likely to remain in
vogue for Q1, meaning higher equities, higher bond yields, and a weaker dollar.
The unexpected Blue Wave adds to the downward pressure on the dollar. For DXY, we
continue to target the February 2018 low near 88.25 but with the unexpected showing for the
Democrats, we need to start thinking about the next target that comes in somewhere near
late-2014 lows near 85. Likewise, we believe the euro is on track to test the February 2018 high near
$1.2555. Following that is the late 2014 high near $1.29. Due to a variety of reasons, sterling is lagging
and has yet to break above the recent cycle high near $1.3705 and it will likely struggle to break above the
April 2018 high near $1.4375. As a result, EUR/GBP is likely to continue climbing. USD/JPY has largely
traded in the 103-104 range since early December. Within the weak dollar environment, the pair remains
heavy and should remain on track to test the March low near 101.20.
It’s worth stressing that we’ve never been in the ultra-bearish dollar camp. For now, we believe
the dollar is in a cyclical dollar downturn, not a structural one. The groundwork has been laid for a robust
U.S. recovery later this year, especially with more fiscal stimulus coming. Surely, equity and bond markets
are already looking ahead to this, and the dollar should eventually carve out a bottom late in Q1 or perhaps
early Q2. However, we have a lot of work to do in terms of controlling the virus so that the economy
can reopen properly. Until that plan has been firmly established, we fear the U.S. will lag other major
economies in terms of recovery.
BBH Foreign Exchange 2021 First Quarter Outlook | 2
Looking ahead, what could derail this Goldilocks scenario? Stimulus lies at the heart and soul of the so-called Blue Wave
One warning sign is the rise in U.S. long rates and TIPS breakeven trades. That is, another round of significant stimulus will be seen
inflation rates. Higher U.S. rates will impact equity valuations as well this year, and that’s positive for U.S. equities. Yes, there will be some
as spread products such as local currency EM debt. For now, Fed sectoral and company-specific risks, especially in tech. However, we
policymakers are sanguine about the recent rise in rates and inflation believe the improved U.S. growth outlook is overall positive for equity
expectations, but the pace has been picking up. The mutation of the markets. The stimulus will be funded with increased debt issuance,
virus poses another risk. While pharmaceutical companies believe and that’s negative for bonds.
that their vaccines will remain effective against the new strains, it’s The U.S. curve continues to steepen. At 104 basis points (bp), the
still too early to be certain.
3-month to 10-year curve is the steepest since March and the year’s
high comes in near 120 bp on March 18. The 10-year yield of 1.12%
U.S. is also the highest since March 18, while the 10-year TIPS inflation
breakeven inflation rate of 2.10% is the highest since October 2018.
Recent developments at the U.S. Capitol change nothing from a Clearly, the rise in the long end is driven in part by rising inflation
fundamental standpoint. Simply put, Joe Biden will be inaugurated expectations. However, we also believe that supply concerns are
President on January 20, and the Democrats will hold both houses of playing a part since the next round of stimulus will have to be funded
Congress, as both Warnock and Ossoff have been declared winners by increased debt issuance.
of the Georgia runoff elections. This means that a 50-50 tie will be
So far, Fed officials do not seem concerned with the steepening
seen in the current Senate, and incoming Vice President Harris will
curve. Kaplan recently said he expects yields to rise due to an
cast the tie-breaking vote.
improved economic outlook, adding that the Fed should not intervene
Chuck Schumer will become Senate Majority Leader and to prevent this from happening. Bullard expects longer-term rates
Democrats will head up the key committees. This will allow the to rise as the economy recovers, adding that rising bond yields also
Democrats to set the legislative agenda, so the Senate may actually reflect hopes for an end to the pandemic. Bullard added that the
vote on a host of bills that never made it past outgoing Majority Leader ingredients for higher inflation are in place and that negative rates
McConnell. Our understanding is that McConnell was able to prevent are not a good option for the U.S. These two are both non-voters
many votes purely by procedural tactics, and this will change under in 2021. That said, Vice Chair Clarida echoed these sentiments. We
Schumer. We also suspect the partisan divide may ease, allowing know from the December FOMC minutes that “a couple” of Fed
for bipartisan passage of some important bills. officials were concerned about rising long rates.
What kind of stimulus can we expect going forward? At a The Fed will keep rates on hold in 2021. And 2022. And most likely
minimum, we believe $1.5 trillion will be proposed. That amount in 2023. With so much slack in the labor market, the Fed will see no
along with the $900 billion passed last month would take the total need to tighten its policy settings for the foreseeable future. Some
up to $2.4 trillion, which is the last real compromise the Democrats officials have started to talk about tapering asset purchases while
offered. Could it be larger? A $2.5 trillion price tag would take the total stressing it won’t happen anytime soon. We think this is a 2022 story,
up to $3.4 trillion, which is what the Democrats passed back in May if not later. We believe the risks are tilted towards increased QE in
but died in the Senate. How about $2 trillion as a solid compromise? 2021, not decreased. Why? The Fed may have to address a significant
This is of course all guesswork and we will have to wait and see steepening of the yield curve with some policy changes. The first line
how the new Congress and new administration frame the issue. of defense is jawboning, followed by shifting asset purchases more
President-elect Biden has already said the price tag will be big, but to the long end, but keeping the total amount unchanged. Next would
no specific numbers have been discussed yet. We also expect a be an increase in the total amount of monthly QE that would likely be
separate infrastructure spending bill of at least $1 trillion this year more weighted to the long end. The final (we think) line of defense
that both parties can support. would be Yield Curve Control. We continue to believe negative rates
are a non-starter for the Fed.
DXY
105.0
QE Round 1 QE Round 2 QE Round 3 COVID-19 Emergency Cut
100.0
95.0 QE Extended, Tapering
adding MBS Starts
90.0
85.0
80.0 Starts Shrinking Jackson Hole
Balance Sheet Speech
75.0
70.0
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
Source: Bloomberg
BBH Foreign Exchange 2021 First Quarter Outlook | 3
EUROZONE After introducing its Pandemic Emergency Purchase Program
(PEPP) last March, the ECB increased the program in June and
Deflation risks are likely to remain high. Headline inflation for December and currently stands at EUR 1.85 billion. The duration
the eurozone ended the year at -0.3% y/y. This is the cycle low and of PEPP was extended through at least the end of March 2022. For
well below the 2% target. The most recent ECB projections from the early part of this year, the ECB is likely to remain on hold to see
December 2020 see inflation rising to 1.0% in 2021, 1.1% in 2022, how the recovery develops. With the vaccine rollout turning out to
and 1.4% in 2023. If anything, these forecasts are on the optimistic be slower than expected and virus numbers rising across Europe,
side and so we can expect accommodative policy to be maintained we believe the recovery will be uneven and will likely require further
into 2024, if not later. Similarly, growth is expected to accelerate to stimulus. Given the cautious nature of the ECB, the next increase in
3.9% in 2021, 4.2% in 2022, and 2.1% in 2023. These too are likely PEPP would most likely come around mid-year.
to disappoint.
U.K.
Central Bank Balance Sheets (USD Trillions)
9
We can finally move on from the Brexit drama. After the last-
8
Fed minute deal was struck last week, the U.K. Parliament passed the
7
ECB deal on January 13 handily with Labour’s support. E.U. government
6 BOJ
leaders unanimously endorsed the deal on a provisional basis, with
BOE
5
formal ratification by the European Parliament to take place in early
4 2021. As of January 1, the U.K. has officially left the E.U.
3
We are not the first (nor will we be the last) to note that this
2
is the first free trade agreement that leads to more barriers
1
to trade, not less. Yes, under the terms of the deal, most goods
0
won’t face new tariffs or quotas. However, U.K. exporters will face
Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17 Feb-19
Source: Bloomberg
regulatory hurdles that will make it more costly to trade with the
E.U. These include rules of origin, testing, and certification of certain
The ECB launched a strategy review last January, and it was goods. While these are not obvious barriers to trade, they nonetheless
supposed to have been wrapped up by year end-2020. Obviously, lead to frictions at the border.
the pandemic has had an impact on the timing and the ECB now aims
The more important services trade was largely left out of the
to complete the review in the second half of 2021. Its last review
agreement. There was no decision on so-called “equivalence” that
was carried out in 2003 and things have changed since then, to put
would allow U.K. financial companies to sell their services unfettered
it mildly. In launching this review, the ECB acknowledged that it is
in the E.U. The two sides will continue talks, but it’s clear that other
in a fundamentally different environment of historically low interest
financial centers across Europe are stepping into the vacuum.
rates and low inflation. It recognizes that there are limits to what
Services account for around 80% of U.K. GDP, with financial services
policy can do in this situation and so must look at other methods of
making up the lion’s share.
stimulating the economy. Judging from various official speeches and
comments, the ECB appears likely to follow the Fed down the path As widely expected, U.K. Prime Minister Johnson announced a
of average inflation targeting. national lockdown. It will likely remain in effect until mid-February.
U.K. is entering its third lockdown as progress on the vaccine has
The ECB remains concerned about the strong euro. President
not been fast enough to mitigate rising hospitalization rates. Primary
Lagarde had a change of heart in recent months and appears to be
schools, secondary schools, and universities will close, with the
paying more attention to the exchange rate. Recently, Governing
exception of vulnerable children and the children of key workers. All
Council member, Rehn echoed her stance and said that while
non-essential retail, hospitality, and personal care services must close
the ECB doesn’t target the exchange rate, “that does not mean
too. The key issue is the widespread concern about the new variant of
that the appreciation is not important,” since it leads to a loss of
the virus, thought to be as much as 70% more contagious. The good
competitiveness and impacts the outlook for growth and inflation.
news is that the new strand doesn’t seem to lead to a more severe
He noted that “We monitor exchange rate developments very closely
outcome for those infected, and vaccines should remain effective.
and we will continue to do so in the future.” That said, there is not
much the bank can do right now besides jawbone.
BBH Foreign Exchange 2021 First Quarter Outlook | 4
The economic implications of the lockdown are very negative. Japan policymakers are concerned with the strong yen. Senior
The economy is likely to contract in Q1 as a result and this will further officials from the Finance Ministry, BOJ, and the financial regulator
delay the overall recovery even more. No wonder Chancellor Sunak met earlier this month and represents the first step in the escalation
just announced a £4.6 billion emergency rescue package to U.K. ladder. The Finance Ministry’s top official on currency matters said
business in the form of grants to help them cope with the renewed afterwards that “The stability of financial markets is extremely
lockdowns. More assistance will probably have to be provided for important. The government and Bank of Japan will work together
workers. The extended job furlough scheme expires at the end of as needed while carefully watching markets and the economy.” Of
April. With the recovery delayed by this current lockdown, the labor course, we all know that “financial stability” is code for a strong
market will still be in bad shape and so another extension seems yen. That said, Japan policymakers are in a similar predicament as
very likely. the ECB and nothing beyond jawboning is likely. We are in a weak
All of these developments point to larger budget deficits ahead. dollar environment, so FX intervention would do nothing beyond an
That in turn suggests a greater likelihood of more QE from the Bank initial knee-jerk reaction.
of England, as the increased gilt issuance will require additional The Japanese economy will continue to struggle despite the
mopping up. The next policy meeting is February 4. While this is regional recovery. Like the U.K., widening lockdowns will weigh on
likely too early to see any action, it’s possible that the bank starts to Japan growth in Q1. Headline inflation fell a tick more than expected
prepare markets for the next slug of QE that will probably come at to -0.9% y/y in November vs. -0.4% in October, while core (ex-fresh
the March 18 or May 6 meetings. While the end of the Brexit drama food) came in as expected at -0.9% y/y vs. -0.7% in October. The
removed a major headwind for sterling, this latest lockdown puts core reading is the worst since September 2010. The most recent
another headwind back on. While we remain negative on the dollar, BOJ projections from October 2020 see targeted core inflation
we believe sterling will lag the other major currencies in the coming rising to 0.4% in FY2021 and 0.7% in FY2022. If anything, these
weeks. That suggests EUR/GBP is likely to be higher in Q1. forecasts are on the optimistic side and so we can expect policy to
be maintained into FY2023, if not later. Similarly, growth is expected
to accelerate to 3.6% in FY2021 and 1.6% in FY2022. These too are
JAPAN
likely to disappoint. FY2023 forecasts will be added at the beginning
Prime Minister Suga declared a state of emergency for the of FY2021 this April.
Tokyo region. It is expected to last one month but that is clearly Bank of Japan kept policy unchanged in December, but
open to question. The head of the government’s advisory panel unexpectedly announced a policy framework review. It extended
admitted “Stronger measures might be needed.” This simply adds its emergency lending and liquidity programs for six months whilst
to the headwinds facing the economy. There is fiscal stimulus in the keeping rates and asset purchases unchanged. However, it pledged
pipeline, however, and so the Bank of Japan is likely to remain on to review the sustainability of its policy framework. The bank stressed
hold for now. Next policy meeting is January 21. that there was no need to scrap its yield curve control as part of the
Suga’s popularity has fallen sharply as a result of the review, but the announcement does suggest there will be tweaks
government’s handling of the virus. As a result, general elections coming that will seek to maintain its accommodative stance for even
are likely to be called later in the year to give Suga time to increase longer. The bank did say it would likely announce the findings in
his standing. We would not rule out yet another stimulus package March. Governor Kuroda said that “Our intent is to keep short- and
near mid-year to give the economy another boost ahead of the vote. long-term policy interest rates at their present or lower levels, and
we won’t be reviewing negative interest rates.”
BBH Foreign Exchange 2021 First Quarter Outlook | 5Emerging
Markets
We subscribe to widespread optimism towards Emerging Markets
(EM) going into 2021, but weigh our preference towards catch-up
trades, especially for commodity-linked assets. High-beta EMs have
already posted a solid outperformance in recent months, but we see plenty
of room for further gains. Latin American assets look especially attractive
as they combine commodity exposure with higher potential for currency
appreciation. Additionally, anecdotal reports suggest positioning by global
Weak
asset managers is comparatively light vis-à-vis EM Asia. There is not
Dollar
much carry to speak of (for now at least), but from a real exchange rate
perspective, Latin America is now in a vastly more competitive position
US-China Low
than they were at the start of last year.
Decoupling Rates
EM
Real Exchange Rate 1-Year Change
DRIVERS (Negative = More Competitive vs Trade-Weighted Basket)
5.0%
Rotation/ Asia-Led 0.0%
Reflation Growth -5.0%
Strong -10.0%
Commodities -15.0%
-20.0% 28 ppts
difference
-25.0%
Brazil
Colombia
Mexico
Chile
Turkey
South Africa
Hungary
Poland
Indonesia
India
So Korea
Taiwan
China
Philippines
Latin America EMEA ASIA
Source: BBH, BIS
As of 1/8/2020
BBH Foreign Exchange 2021 First Quarter Outlook | 6This is not to say that we have a negative outlook on Asia’s Domestically, we are monitoring any fiscal hangover leading to
emerging markets, but the drivers are different, and likely to deteriorating fundamentals. The combination of weaker growth
play out over a longer period. The speed and intensity of the (and fewer tax revenues) plus increased spending could lead to
change policy direction in China will be the dominant marginal variable long-lasting downgrades to the outlook. Many countries may find
going forward for the region. China’s renewed efforts to rebalance themselves unable/unwilling to pare back social assistance for political
a domestic growth engine, investment in tech infrastructure away reasons. For example, the difference in stimulus between Mexico
from US components, and redrawing of global supply chains are all (comparatively low) and Brazil (high) will have a long lasting impact on
long-term positives for the region. Also, a stronger yuan (our base the relative ratings of these countries. Another complicating factor is
case) will drive China’s growing import demand. With China aside, the simultaneous global borrowing binge over last year, which could
Asia will be far less scared by the virus than Western countries, mean several maturity walls down the line. One can easily imagine a
translating to continued growth outperformance. world where U.S. yields are rising, and EM had a much harder time
competing for funding or rolling over their debt. Local debt curves
Despite our positive outlook for Emerging Markets, there
already reflect this reality to some extent, forcing some governments
are plenty of variables at play. First, long EM trades are as
to reduce the maturity of their rolled over debt.
consensus as you can get at this juncture. Similarly, markets are
convinced there will be a continued decline of the dollar, a view
based on continued support from the Fed, more fiscal expansion, Selected Local EM Sovereign Curves
and portfolio diversification away from U.S. assets, and we agree. 12.0%
Brazil
Yet let’s not forget that Europe, the U.K., and Japan are not doing
10.0% Mexico
that well, posing a risk to the weak dollar view. In addition, inflation South Africa
expectation continues to rise in the U.S., with 10-year breakevens 8.0% India
above 2% after the Georgia elections, helping drive the nominal Indonesia
6.0%
10-year higher. With the Fed having just established its Average
4.0%
Inflation Targeting framework, the risk of a sudden reversal – a new
Taper Tantrum – is increasing. Ultimately, the risk to EM comes from a 2.0%
steepening U.S. curve driven by inflation expectations, not growth. On
0.0%
the geopolitical stage, we think the U.S.-China conflict will continue; 3M 1Y 3Y 6Y 10Y
it’s just a question of how severe and disruptive it will be. Markets Source: BBH, BIS
As of 1/8/2021
may be somewhat complacent as Biden will be under pressure from
his left flank to act on any perceived human rights violations by China.
What we are watching in EM
RUSSIA AND SAUDI ARABIA
Dollar The Biden administration will (theoretically, at least) stand in
Rebound opposition to Russia, Saudi Arabia, and the U.S. oil industry
while reproaching Iran. Biden has enough reasons to stand up
US-China US Rates against Russia as it is, but with the results of Georgia, we think the
Conflict Rising balance of risk has shifted for the worse. Democrats are likely to
EM want some payback from perceived Russian interference in the U.S.
elections, the recent hacks, as well as many other actions taken by
RISKS Putin on the geopolitical stage. Tensions between Germany and
Russia following Alexey Navalny’s poisoning and the 2019 murder
Domestic in Tiergarten can serve as a bridge for cooperation between the U.S.
Inflation and Europe on reprehending Russia. Meanwhile, maintaining a good
Politics
relationship with Saudi Arabia will be harder under Biden for at least
Fiscal
two reasons: The Democratic party’s greater emphasis on human
Hangover
rights (see the Jamal Khashoggi case) and Iran. Biden is expected to
take up Obama’s mantel over Iran and reduce sanctions. Not only will
this increase the global oil supply, but will anger the Saudi, pushing
it closer to Russia and possibly China.
BBH Foreign Exchange 2021 First Quarter Outlook | 7TURKEY CHINA
Trump’s decision to impose sanctions on Turkey before the The country will continue benefiting from economic
elections served as a positive development. The very light-handed outperformance and sustained inflows. We expect the yuan to
measures reduce the likelihood for stronger action by the incoming continue appreciating and relatively high interest rates for its local
Biden administration. In fact, it could lay the base for a rekindling of bond market to remain advantageous, making it one of the best carry
the U.S.-Turkey relationship, especially if this can be articulated in trades out there. When adjusted for volatility, a long yuan position
opposition to Russia. This upside risk, along with the recent shift against the dollar is on par with the Mexican peso and South African
towards economic policy orthodoxy, should materially improve the rand in terms of carry. From a fundamental perspective, the “dual
outlook for Turkey’s asset prices in the near-to-medium term. There circulation” strategy will accelerate the rebalancing from external to
is still a lot to dislike about Turkey’s fundamentals (and even more if domestic demand, and a stronger currency would help the process.
oil prices continue rising), but the country should get a pass for now, But, as always, we need to remind ourselves that the yuan is as
at least as far as financial markets are concerned. much an economic instrument as it is a political one, meaning that
trajectory won’t be without speed bumps. Lastly, we expect Biden’s
BRAZIL AND SOUTH AFRICA policy towards China to be stabilizing in the short term because (1)
Both countries share many positive and negative factors, it will be slower moving, seeking consensus, and advice, (2) it will
with high risk-reward profiles, but we favor Brazil over South re-weight concerns more towards human rights and away from trade;
Africa. Both are firmly in the high-beta category and are commodity and (3) less erratic than under Trump. In the medium-term, however,
exporters. Both countries face very complicated political outlooks a sustained policy against China under Biden can gain a lot more
and deep-rooted fiscal challenges, neither of which are likely to traction globally and be more effective in de-coupling the sphere of
be resolved in the foreseeable future. And the fiscal outlook is influences around the two countries.
now highly dependent on how the pandemic develops, with more
transfers likely if the numbers spike. Despite ZAR’s impressive
recovery over the last 6-months, both are still underperforming in Volatility-Adjusted Carry (3M)
the EM space compared to pre-pandemic levels, but BRL has far South Africa
more catch-up potential. 1.0% Mexico
Brazil
0.8% China
CHILE
0.6%
Local assets remain in flux from pension fund withdrawals and
0.4%
supported by the skyrocketing price of copper. But, next year,
the Constitutional Convention Election (April) can be a risk. This is 0.2%
when we will find out the composition of the assembly in charge of 0.0%
drafting the constitution, which will determine the scope and how Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21
unfriendly to the market the outcome is presumed to be. Source: BBH, Bbg
BBH Foreign Exchange 2021 First Quarter Outlook | 8Currency Forecasts*
Major Markets
In US Dollar Terms Current Q1 2021 Q2 2021 Q3 2021 Q4 2021
Euro 1.22 1.26 1.25 1.24 1.23
Yen 104 100 102 104 106
Sterling 1.36 1.40 1.44 1.42 1.40
Canadian $ 1.27 1.25 1.24 1.23 1.22
Australian $ 0.77 0.79 0.80 0.81 0.81
New Zealand $ 0.72 0.73 0.74 0.75 0.75
Swedish Krona 8.30 7.86 7.80 7.78 7.80
Norwegian Krone 8.47 8.02 8.00 7.98 8.01
Swiss 0.89 0.85 0.86 0.88 0.89
In Euro Terms Current Q1 2021 Q2 2021 Q3 2021 Q4 2021
Yen 126 126 128 129 130
Sterling 0.89 0.90 0.87 0.87 0.88
Swiss Franc 1.08 1.07 1.08 1.09 1.10
Swedish Krona 10.10 9.90 9.75 9.65 9.60
Norwegian Krone 10.31 10.10 10.00 9.90 9.85
Emerging Markets
In US Dollar Terms Current Q1 2021 Q2 2021 Q3 2021 Q4 2021
Chinese Yuan 6.47 6.35 6.22 6.20 6.20
Hong Kong $ 7.75 7.75 7.75 7.75 7.75
Indian Rupee 73.15 72.00 71.00 70.00 70.00
Korean Won 1095 1075 1060 1050 1050
Indonesian Rupiah 14060 13750 13500 13250 13250
Malaysian Ringgit 4.04 4.00 3.95 3.90 3.95
Philippine Peso 48.06 47.50 47.00 46.50 46.50
Singapore Dollar 1.33 1.31 1.29 1.30 1.30
New Taiwan $ 28.02 27.75 27.50 27.50 27.50
Thai Baht 30.02 29.75 29.50 29.50 29.50
Brazilian Real 5.30 5.00 4.80 4.90 5.00
Mexican Peso 19.76 19.00 18.50 18.50 18.50
Czech Koruna 21.49 20.44 20.40 20.56 20.73
Hungarian Forint 296 282 280 282 285
Polish Zloty 3.73 3.53 3.52 3.59 3.62
Russian Ruble 73.69 72.50 71.50 70.00 71.00
South African Rand 15.25 14.75 14.50 14.50 14.50
Turkish Lira 7.41 7.10 6.80 6.80 6.90
Israeli Shekel 3.13 3.10 3.00 3.00 3.00
In Euro Terms Current Q1 2021 Q2 2021 Q3 2021 Q4 2021
Czech Koruna 26.15 25.75 25.50 25.50 25.50
Hungarian Forint 360 355 350 350 350
Polish Zloty 4.54 4.45 4.40 4.45 4.45
*There is no assurance that future forecasts will be attained.
BBH Foreign Exchange 2021 First Quarter Outlook | 9DISCLOSURES
This material is provided solely for informational purposes by Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) to
recipients who are classified as institutional or sophisticated investors, or as Professional Clients or Eligible Counterparties if
in the European Economic Area (“EEA”). BBH is an independent FX research provider and this communication should not be
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advised that any analysis of individual countries, currencies, securities or other asset classes contained herein, including, but
not limited to, rankings contained in BBH Country Risk Ratings, FX Risk Rankings and Equity Risk Rankings, should not be
considered sufficient information upon which to base an investment decision. Such analysis is intended to serve as a preliminary
screening tool, which should be supplemented by additional research.
This material contains “forward-looking statements” which include information relating to future events, projected future perfor-
mance, statements regarding intentions, strategies, investments, expectations, the competitive and regulatory environments,
predictions, and financial forecasts concerning future foreign exchange activities and results of operations and other future
events or conditions based on the views and opinions of BBH. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be
accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are
based on information available at the time the statements are made and/or BBH’s good faith belief as of that time with respect
to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from
those expressed in, or suggested by, the forward-looking statements. Actual results of activities or actual events or conditions
could differ materially from those estimated or forecasted in forward-looking statements due to a variety of factors.
There are risks associated with foreign currency investing, including but not limited to the use of leverage which may accelerate
the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and
economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries.
Foreign currency transactions may not be suitable for all investors depending on their financial sophistication and investment
objectives. The services of an appropriate professional should be sought in connection with such matters.
BBH, its partners and employees may own currencies discussed in this communication and/or may make purchases or sales
while this communication is in circulation.
Information has been obtained from sources believed to be reliable and in good faith. Sources are available upon request. Past
performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Any
opinions expressed are subject to change without notice. This material has been prepared for use by the intended recipient(s)
only. Unauthorized use or distribution without the prior written permission of BBH is prohibited. Please contact your BBH
representative for additional information.
BBH is a service mark of Brown Brothers Harriman & Co., registered in the United States and other countries. © Brown Brothers
Harriman & Co. 2021. All rights reserved.
BBH Foreign Exchange 2021 First Quarter Outlook | 10FOREIGNEXCHANGE NEW YORK BEIJING BOSTON CHARLOTTE CHICAGO DUBLIN GRAND CAYMAN HONG KONG JERSEY CITY KRAKÓW LONDON LUXEMBOURG NASHVILLE PHILADELPHIA TOKYO WILMINGTON ZÜRICH WWW.BBH.COM 20210017
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