CURRENCY RISK ASSESSMENTS
In addition to our regular monthly surveys for our panellists central projections for over 90 currencies we also ask our panellists for their estimates of the likelihood of alternative, perhaps less likely, outcomes in certain major currencies over the next twelve months in Foreign Exchange Consensus Forecasts (in July and December) for the currencies listed below.
To download a sample issue of Foreign Exchange Consensus Forecasts please click on the button to below or continue reading to learn more about this special survey.
| G7 | Asia Pacific | Eastern Europe | Latin America | Africa |
|---|---|---|---|---|
| Euro | Australian Dollar | Czech Koruna | Argentinian Peso | South African Rand |
| Japanese Yen | Chinese renminbi | Hungarian Forint | Brazilian Real | |
| UK Pound | Hong Kong dollar | Israeli Shekel | Chilean Peso | |
| Canadian Dollar | Indian Rupee | Polish Zloty | Mexican Peso | |
| Indonesian Rupiah | Turkish lira | Peruvian Sol | ||
| Malaysian Ringgit | Venezuelan Bolivar | |||
| New Zealand dollar | ||||
| Philippine Peso | ||||
| Singapore dollar | ||||
| South Korean Won | ||||
| Thai Baht | ||||
| Taiwanese dollar |
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The table and text commentary below represent a portion of this special survey taken from our December 2011 issue of Foreign Exchange Consensus Forecasts
| Consensus Probability (%) of Currency Depreciation or Appreciation | |||||||
| Survey Dated December 12, 2011 | Currency Link | Depreciation vs US$ | +/-5% | Appreciation vs US$ | |||
| -20% or more | -6% to -19% | +6% to +19% | +20% or more | ||||
| Japanese yen | Floating | 3.0 | 16.0 | 54.0 | 23.0 | 4.0 | |
| UK Pound | Floating | 4.0 | 21.6 | 55.0 | 15.4 | 4.0 | |
| South African rand | Floating | 3.3 | 30.0 | 46.7 | 16.7 | 3.3 | |
| Venezuelan bolivar | Pegged to US$ | 18.8 | 31.0 | 47.5 | 1.5 | 1.3 | |
| Chinese renminbi | Managed Float | 0.3 | 9.3 | 83.3 | 6.7 | 0.5 | |
| Hungarian forint1 | Floating | 11.3 | 25.0 | 46.3 | 15.8 | 1.8 | |
1 Probabilities are for appreciation/depreciation against the euro.
Consensus forecasts are averages of individual panellists’ predictions of how a currency is most likely to move over a given time horizon, but most forecasters would also attach some probability to various alternative outcomes or scenarios. This special survey on ‘Currency Risk Assessments’ is an attempt to quantify these uncertainties, using our panellists’ estimates to produce a number of consensus probability or risk distributions. The usefulness of this approach is clearly illustrated in the case of pegged or heavily managed currencies, like the Chinese renminbi and the Venezuelan bolivar. However, it can also be valuable for identifying the direction of risk associated with currency forecasts in countries where valuations are dependent to a large extent on unclear global macroeconomic developments or government policy actions. In Latin America, movements in the Argentinian peso have been restricted by exchange controls, which were tightened to curb capital flight during the recent presidential election. Yet, as can be seen in the table above and chart on next page, most panellists attach similarly high probabilities to a currency decline of between ‘6 and 19%’ and ‘20% or more’. These figures partly underline concern that the government might abruptly weaken the peso to improve competitiveness, as well as doubts about Argentina inflation statistics, which have lost credibility since 2007. In Eastern Europe, consensus forecasts for the Turkish lira suggest a 6.4% recovery over the next twelve months, having seen it decline sharply since October 2010. A significant amount of uncertainty, though, surrounds the outlook for the currency, reflecting risks stemming from inflation and the challenge of cutting the country’s large current account deficit, which reportedly rose to 10% of GDP in the first nine months of 2011.
A portion of text taken from Foreign Exchange Consensus Forecasts, December 12, 2011