EFTA01149101.pdf

From: US GIO To: Undisclosed recipients:; Subject: JPM Private Bank Q4 2011 FX Quarterly Outlook Date: Wed, 12 Oct 2011 18:11:37 +0000 Attachments: 2011_FX_outlook_Scp_2011-_FINAL-pdf.xip I niinc-Images: image001.png Global Investment Opportunities Group (GIO) J.P.Morgan Please find attached our Q4 FX quarterly publication, with updated forecasts for G10 and EM currencies. From a Foreign Exchange perspective, September 2011 has confirmed that I) there is not such a thing as decoupling In the currency world and II) that g tarnn(06)1a deleveragIng, the USD (and the yen) remains the ultimate safe-haven currency. This view was well captured by the substantial gains seen in the USD against EM and cyclical currencies in late Q3. On a trade weighted index basis and referring to the .IPMS LLC US TWI, the US currency was roughly flat year to date by the end of 032011. We expect the weakening USD trend to resume as risk appetite returns, modestly in Q4 and more so Into 2012. LooldnakibM24 and Into eady1012, a few important considerations to bear in glad: I) The key cyclical, structural, diversification USD bear forces remain in place. ii) The bullish long-term EM/commodity currencies case is still valid. More interventionist EM central banking activity to be expected should EM currencies come back under pressure. In the EM space, we remain most bullish on Asia EM, followed by Latam and EMEA EM. iii) We acknowledge that the EM world Is entering into a softening phase of the economic cyde, but recession risks are low at this stage. Expect aggressive monetary- fiscal policy responses should the economic climate weaken faster than expected. ivl The euroxone debt crisis is likely to stay In the limelight In the near-term with the eurozone running out of time. In that respect, we are slightly more optimistic on a credible solution to be delivered soon. Should that prove right, it would boost risk assets and be consistent with our still bullish EM/cyclical currencies outlook for next year. v) besides developments in the eurceose, global macro-economic news will be of prime Importance for the FX market in 44 and In early 2012. US/European recession scenario and/or marked deterioration in the Asia/EM economic climate would hurt sentiment further. The USD and the yen would be the winners and EM/cyclical currencies, the biggest losers in this context. This Is not our central scenario, but a risk Important to highlight. This email is confidential and subject to important disclaimers and conditions including on oilers for the purchase or sale of securities. accuracy and completeness of information, viruses, confidentiality, legal privilege. and legal entity disclaimers, available at http://www.jpmorgan.comMagcs/disclosureslemail. EFTA01149101