EFTA01446666.pdf

9 January 2014 FX Blueprint: Thin end of the wedge History provides us with good templates of economies Strong and persistent FDI inflows into Israel where oil/gas findings resulted in a significant contribution to the BoP and persistent appreciation (NLG & NOK). Also, Bol governor Hug acknowledged 4- as much on Nov 19th when she argued that the current 3- intervention policies are only "acting to give the 2 G1 business sector time to adjust to the trends derived from [long term economic) forces". Buy 1LS vs USD, 9 o- targeting 335 with a stop @ 35750 4-1 et2 - Having reduced rates aggressively since mid 2012, the NBH adopted a more conservative policy approach, 2004 2006 2008 2010 2012 with financial stability moving back up the agenda. Real yields remain among the most attractive globally. — Net Transactons, Direct Investment retail sales are growing YoY, the PMI firmly is in si Israeli Direct Investment Abroad expansionary territory, unemployment has fallen and ■ Foreign Direct Investment the C/A balance is in surplus. Be long HUF vs EUR, targeting 290 with a stop @ 305 Sans Deasek•annit EtbIntholifinanc• LP 1 While the ruble trend has been highly negative over the past few months, favourable seasonality going into Hungary C/A in surplus and growing Feb/Mar and bearish positioning make us cautiously constructive around current levels. The relatively low 1.0 - balance sheet risk. attractive carry. CBR's strong anti- 0.5 - inflationary policy stance, and a robust surplus in the goods balance are other supportive factors. Buy RUB vs o.o AIL EUR, targeting 4310, stop @ 45.90. to.5 - to - ZAR is cheap but arguably not yet sufficiently, and in the absence of any meaningful improvement in the its - external balances there is scope for further weakening 2.0 - in a rising interest rate environment. C/A fundability -2.5 - r remains the key risk, with exports so far showing few 1998 2000 2002 2004 2006 2008 2010 2012 signs of improvement from past currency weakness. Even so, there has been some response to stronger — 12m MA re Balance demand from abroad and with global growth San Punt.* &ink Ha:nen Awn, O> continuing to improve this should be reflected in gradual rand stabilization. Key levels are: a) 10.85, where price action according to our metrics would be Turkey's narrow & broad bask balances (12m rolling) severely stretched and thus raise the probability of a significant snap-back, and b) 10.40, which represents -130 the lower end of the more recent channel. On a break of either, target a 3% move in USD/Z4R to 1050 or - 120 10.10 respectively. B-1 Turkey's lira remains vulnerable to a tightening of global liquidity due to its sizeable C/A deficits and/or short-term external debt repayments in an environment of rising global yields. Add to that ongoing domestic political uncertainty and TRY should remain under pressure. Stay long USD/TRY, target 2.250, stopping at 2007 2009 2011 2013 2.1350. — TRY NEEft, Ms • Broad Basic Balance (CM • FDI • Port(oIo lows). In o Narrow Basic Balance (C/A* FOR Its Mena' Gaither°, London, +tall 20754 59847 Sane veva:P.arm. akwereteg ',nonce In Page 18 Deutsche Bank AG/London CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 100967 CONFIDENTIAL SDNY_GM_00247151 EFTA01446666