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Media Coverage

Read this Reuters article about the use of Target Redemption Forward (TARF) during the stable period of the INR. The article looks in to why TARF is appealing and the challenges it may pose in different situations. QuantArt’s Managing Director, Samir Lodha shares his views in the article highlighting how important it is to plan the structure of the TARF well to optimise return while mitigating risks.

The FOMC meeting held on March 20, 2024 went as expected, with interest rate unchanged at 5.25%-5.5% at and hawkish economic projections. The FOMC raised their year end PCE inflation estimate higher to 2.6% and also projected a higher growth and lower environment. The ‘dot plot’ indicated a similar rate cut expectations in 2024 as they were in the last meeting but moved the 2025 and 2026 rates higher. The Committee aims for maximum employment and a 2% inflation rate, noting that risks are balancing and remains alert to inflation risks. 
Fed Chair Jerome Powell maintained that inflation pressures will ease and reaffirmed that the Fed is on pace for rate cuts this year, and expressed comfort that the inflation is on the right track. . Powell also discussed plans to slow the pace of reducing the Fed’s bond holdings to ensure a smooth transition. Overall, the Fed remains cautious, monitoring inflation trends and economic indicators closely before making significant policy changes.

Financial Markets 2024

Market Holidays

Trending Insights

Currency and Market Outlook

For comprehensive insights into currency and commodity markets, explore our latest series of reports in QuantArt Hedgenius. Covering 14 currencies and 9 commodities, these reports are meticulously researched to provide you with critical market intelligence. To delve into the full analysis, access the detailed reports by logging into Hedgenius.

Global Markets

To read the full report log in to QuantArt Hedgenius.

The USDTRY Outlook and Strategy

Seeking insights into Turkey’s economic landscape? Dive into our comprehensive report for a detailed analysis of recent developments shaping the nation’s financial trajectory. From economic growth and monetary policy to foreign direct investment and exchange rate outlook, our report covers key topics impacting Turkey’s economy.

The CAD Outlook and Strategy

The January 2024 CAD Outlook delves into Canada’s economic landscape, marked by unexpected core inflation rises and a mixed sectoral performance, hinting at a cautious approach towards interest rate cuts. With the economy showing signs of slowing down amidst high interest rates, the Bank of Canada faces a complex balancing act. The report also highlights challenges in the labor market, trade dynamics, and the impact of global economic conditions on the CAD, offering a comprehensive analysis for investors and corporates navigating these uncertain times.

The CHF Outlook and Strategy

In February 2024, the CHF Outlook reveals Switzerland’s adept navigation through global economic turbulence with a strategic blend of fiscal prudence and monetary acumen. As the Swiss National Bank (SNB) fine-tunes its policy levers, balancing a 1.75% key rate against inflationary pressures, the CHF stands as a bastion of stability. Amidst fluctuating trade dynamics, the report underscores a noteworthy trade surplus and robust retail sector resilience, setting a precedent for investors and policymakers eyeing the alpine nation’s economic trajectory and its implications on global financial currents,

The AUD Outlook and Strategy

In the ever-changing economy, the Australian Dollar (AUD) is taking a careful approach.  As inflation moderation and hawkish central bank moves intersect with retail and housing market pressures, the AUD’s journey is poised for short-term appreciation, with a cautious eye on longer-term horizons. It’s crucial to balance strategies, using hedging wisely as we ride through these economic waves.

The ZAR Outlook and Strategy

In January 2024, South Africa’s economy confronts several hurdles. The GDP contracts by 0.2% in Q3 2023, influenced by power challenges and a difficult global environment. Manufacturing PMI remains in contraction for ten months, although slightly improving to 48.2. The nation also faces a surprising trade deficit of ZAR 12.7 billion. However, easing inflation at 5.5% and a stable key repo rate of 8.25% provide some optimism. With these mixed indicators, the South African Rand (ZAR) is expected to move towards 18 in the short term, reflecting the economy’s complexity and resilience.

The Chinese Yuan Outlook and Strategy

In January 2024, the Chinese economy demonstrated resilience and strategic shifts. Surpassing growth predictions with a 4.9% increase, the country tackles trade and property challenges. Amidst these developments, the People’s Bank of China maintains low interest rates, influencing both domestic and international financial strategies. This presentation delves into these dynamics, offering insights for investors and businesses navigating the evolving economic landscape of China.

Foreign Exchange

To read the full report log in to QuantArt Hedgenius.

Foreign Exchange

Fx and Hedging Requirements of Power Sector

Power companies, irrespective of their reliance on renewable energy or coal, encounter foreign exchange risks. Coal-dependent firms frequently import coal, exposing them to exchange rate fluctuations every few months. Renewable energy companies also face this risk because they might import solar panels, or even if they buy them locally, their prices can be affected by currency changes.

Reducing interest costs is crucial for all power companies because it helps them make more money from their investments. At times, leveraging external commercial borrowing (ECB) alongside effective hedging mechanisms can prove more economical than borrowing in the local currency, often resulting in savings of 1.50% to 2.50%. So, it’s imperative for renewable energy firms to adeptly manage foreign exchange risks. Additionally, prudent management of interest rate risks, whether concerning local rates or benchmarks like the SOFR (Secured Overnight Financing Rate), is crucial. 

This document elucidates these risks and proposes various risk management strategies, including the costs associated with different hedging instruments and prevailing market conditions.

NSE Option Strategies for Exporters, Importers and Traders

The report provides insightful hedging strategies for various market participants against INR fluctuations. For importers, it suggests seagull structures offering downside protection and upside potential. Exporters are advised to use seagull options to hedge against INR appreciation while capitalizing on depreciation. Traders are recommended to employ strategies like Short Straddle with Protective Put in low volatility environments, ensuring premium income and protection against significant INR movements.

Commodity and Interest Rates

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The Copper Outlook and Strategy

February’s Copper Outlook 2024 teases a dynamic shift, with copper prices on a climb. Despite China’s slowdown, demand surges, especially from the renewable energy sector. A major mine closure in Panama hints at a shift from surplus to shortage. Plus, an anticipated 5.8% bump in global production might not keep pace with the booming EV market’s copper hunger. Will this mean greener tech at higher costs?

The Aluminum Outlook and Strategy

The “Aluminium Outlook Report January 2024” examines the global aluminum market’s dynamics. Key points include China’s declining property sector impacting 40% of domestic aluminum demand, a 7.31% year-on-year drop in LME 3-month aluminum prices, and global supply constraints due to Chinese smelter production caps. Additionally, UK sanctions on Russian aluminum and the Guinea oil depot explosion may limit supply, influencing prices. Global macro-economic factors like a dovish Fed and potential rate cuts will also influence prices in the medium term. The report is crucial for stakeholders to navigate these market changes and plan accordingly.

Borrowing Costs in Various Currencies

Unlock the secrets to smart borrowing in 2024 with our analysis of global interest rates. Discover why USD, GBP, AED, and INR have higher rates, while EUR, CHF, and JPY are more affordable. Learn how to navigate the tricky landscape of interest rate swaps and currency risk management to optimize your borrowing costs. Our guide provides crucial insights into managing loans in a high-interest rate environment while adhering to local regulations, making it an essential tool for savvy financial planning.

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