Daily Brief – 2+1 ‘winners’

2+1 ‘winners’

Happy New Year. As weather warnings fade in favour of New Year’s resolutions, the UK embarks upon its first trading day of 2025. Some markets remain closed today with notable value date exceptions from Switzerland, Japan and New Zealand. As we highlighted earlier in the week, 2024 was characterised by the typically asynchronous existences of broad Dollar strength and developed market equity outperformance (particularly in the US). It is similarly uncommon for emerging market currencies to outperform during such a bout of Dollar strength. So, how did they perform?

By and large, poorly is the answer. On a trade weighted basis there were a broader range of identifiable winners. Within the developing market currency basket when measured against the US Dollar however, the only lesser-managed currencies of the Malaysian Ringgit and Thai Baht managed to keep their head above par. A win by technicality only is awarded to the Hong Kong Dollar which, pegged within a band, stands approximately 0.5% stronger on this day in 2025 than it did a year ago. So, it seems emerging market currencies have behaved more in line with expectations given the stronger Dollar.

In terms of those currencies that have shed the most weight, presumably now to be known as the Ozempic currency list, several compete for first place. Amongst the more economically significant EM nations, it is Brazil’s Real and Mexico’s Peso that battle it out for first and second place. South Africa’s Rand battled it out until the end to see whether it would suffer its fifth straight year of losses versus the Dollar. Ultimately it did, down circa 2.5% in a not too shabby performance. Despite risks posed by the potential for stagnation within political and economic reforms and the forthcoming second Trump administration, the Rand is forecast to outperform in 2025. 

Discussion and Analysis by Charles Porter

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