Goldman Sachs on the exotic currencies

INR and ZAR have underperformed other “good carry” EM currencies and positioning in both is likely less concentrated than for BRL and RUB, Goldman Sachs strategist Kamakshya Trivedi writes in note.
Fundamentals still argue for long positions, but out-performers like RUB, BRL may be running into resistance.
For INR:
“Most acute economic impact of demonetization is likely behind us;” there’s scope for renewed equity inflows to benefit INR, “especially if a BJP win in the Uttar Pradesh election further supports reform momentum. Within the ‘good carry’ currencies, it may be the INR’s turn to shine”
For ZAR:
In near-term, political headlines to continue dictating moves in ZAR, “although we continue to think that such periodic back-ups are opportunities, especially if political risk declines down the line”
A global expansion poses risks to a short KRW, SGD, MYR view; stock and currency markets in EM Asia can remain well- supported if U.S. administration produces large fiscal boost for U.S. and global growth, talks down USD, implements a limited protectionist policy.
Prefers MXN over TRY:
“If we had to pick one of these undervalued candidates, we would prefer the MXN – our 12-month forecast for $/MXN is 19, which is about 8% stronger than current levels;” while
MXN has more to lose from U.S. protectionism than EM Asia, “more of those risks are priced in”

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