📄 Extracted Text (11,990 words)
Global
28 February 2013
Special Report
Exchange Rate
Perspectives
The Dollar is Back
How China Rebalancing, the Great Rotation to the US and
Abenomics Will Change the World
Research Team
Bilal Hafeez
Strategist
Deutsche Bank AG/London
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P)
072/04/2012.
Foreign Exchange
Global Markets Research
Macro
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28 February 2013 Exchange Rate Perspectives
Table of Contents
Currency
Forecasts
3
The Big Picture:
The Dollar Is
Back
5
Monitors:
G10 FX Valuation Monitor: Lines in the
sand
12
Capital Flows and Basic
Balances
18
Commodity Prices and
Currencies
28
U.S. Trade
Balance
33
Central Bank Reserves Currency Composition
Monitor
41
Page 2
Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
Currency Forecasts
Industrialized Countries
Spot
Currency Rate
US $ Exchange Rates
U.S.
Euro
Japan
U.K.
US$/Euro
(Fwd. Rates)
Yen/US$
(Fwd. Rates)
US$/£
(Fwd. Rates)
Canada C$/US$
(Fwd. Rates)
Australia US$/A$
N.Z.
(Fwd. Rates)
US$/NZ$
(Fwd. Rates)
Switzerland Sfr/US$
(Fwd. Rates)
Euro Cross Rates
Japan
U.K.
Yen/Euro
(Fwd. Rates)
£/Euro
(Fwd. Rates)
Switzerland Sfr/Euro
(Fwd. Rates)
Norway Nkr/Euro
(Fwd. Rates)
Sweden Skr/Euro
(Fwd. Rates)
China
DB US$ Index 69 69 71 73
1.31
1.30 1.25 1.20
- 1.31 1.31 1.31
92 96 98 100
92 92 92
1.51 1.49 1.45 1.41
- 1.51 1.51 1.51
1.03 0.98 0.98 1.00
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- 1.03 1.03 1.03
1.02 1.04 1.02 1.00
- 1.01 1.01 0.99
0.82 0.83 0.82 0.80
- 0.82 0.81 0.80
0.93 0.96 1.00 1.04
- 0.93 0.93 0.93
120 125 123 120
- 120 120 120
0.87 0.87 0.86 0.85
- 0.87 0.87 0.87
1.22 1.25 1.25 1.25
- 1.22 1.22 1.22
7.48 7.30 7.20 7.10
- 7.51 7.54 7.61
8.45 8.20 8.10 8.00
- 8.47 8.49 8.54
Source: Datastream, Reuters, Bloomberg Finance LP, DB forecasts
Hungary
Indonesia IDR/USD 9,686 9,950 9,900 9,850
(Fwd. Rates)
Malaysia MYR/USD 3.10 3.07 3.05 3.02
(Fwd. Rates)
3.12 3.13 3.16
Philippines PHP/USD 40.7 40.4 39.9 39.3
(Fwd. Rates)
40.7 40.7 40.8
Singapore SGD/USD 1.24 1.21 1.21 1.20
(Fwd. Rates)
1.24 1.24 1.24
South Korea KRW/USD 1,085 1,075 1,050 1,040
(Fwd. Rates)
- 1,091 1,096 1,103
Taiwan TWD/USD 29.7 29.2 28.5 28.3
(Fwd. Rates)
29.6 29.5 29.3
Thailand THB/USD 29.8 30.0 30.0 30.0
(Fwd. Rates)
30.0 30.1 30.3
Source: Datastream, Reuters, Bloomberg Finance LP, DB forecasts
Emerging Europe
Spot
Currency Rate
Czech Rep. Koruna/Euro 25.6 25.0 24.5 23.8
(Fwd. Rates)
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Koruna/US$
(Fwd. Rates)
Forint/US$
(Fwd. Rates)
Latin America
Spot
Currency Rate
Argentina ARS/USD 5.04 5.18 5.50 6.10
(Fwd. Rates)
Brazil
Chile
4.63 4.87 5.33
BRL/USD 1.98 1.95 2.00 2.05
(Fwd. Rates)
CLP/USD 473 476 490 505
(Fwd. Rates)
480 485 495
Colombia COP/USD 1,814 1,770 1,750 1,745
(Fwd. Rates)
- 1,828 1,840 1,867
Mexico MXN/USD 12.8 12.7 12.6 12.2
(Fwd. Rates)
Source: Datastream, Reuters, Bloomberg Finance LP, DB forecasts
12.9 13.0 13.2
2.00 2.03 2.08
Russia
Turkey
3M 6M
12M
Poland
Zloty/US$
(Fwd. Rates)
Ruble/US$
(Fwd. Rates)
Lira/US$
(Fwd. Rates)
South Africa Rand/US$
(Fwd. Rates)
Forint/Euro 296 280 280 280
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(Fwd. Rates)
25.6 25.6 25.6
19.6 19.2 19.6 19.8
19.6 19.6 19.5
299 302 306
226 215 224 233
228 230 233
Zloty/Euro 4.16 4.06 3.96 3.80
(Fwd. Rates)
4.20 4.24 4.30
3.18 3.12 3.17 3.17
3.21 3.23 3.27
30.6 30.5 30.5 30.6
30.3 30.9 31.5
1.80 1.80 1.80 1.85
1.82 1.84 1.88
8.86 8.70 8.50 8.40
8.98 9.08 9.30
Source: Datastream, Reuters, Bloomberg Finance LP, DB forecasts
3M 6M
12M
- 9,753 9,863 10,101
Hong Kong HKD/USD 7.76 7.77 7.80 7.80
(Fwd. Rates)
India
7.75 7.75 7.75
INR/USD 53.7 53.5 53.2 51.5
(Fwd. Rates)
54.6 55.4 57.0
3M 6M
12M
Asia
Spot
Currency Rate
CNY/USD 6.23 6.25 6.20 6.12
(Fwd. Rates)
6.24 6.25 6.27
3M 6M
12M
Deutsche Bank AG/London
Page 3
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28 February 2013 Exchange Rate Perspectives
G10 FX Forecasts: End of Quarter
Source: Deutsche Bank
Page 4
Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
The Dollar Is Back: How China
Rebalancing, The Great Rotation To US
and Abenomics Will Change The World
Bottom Line
Almost all currencies appeared to have peaked against the dollar, and the
more recent rise in
USD/JPY suggest the broad dollar is embarking on a multi-year uptrend.
Superior US growth
should support the rotation from bonds to equities that will help the
dollar. Abenomics shows
the scope central banks outside of the US have to weaken their currencies
against the dollar.
China rebalancing away from investment provides a downside risk to the China-
linked
currencies that have done so well since 2008. All these trends are
intertwined and together
point to sustained dollar strength. In terms of forecasts, by 2015, we
expect EUR/USD to
reach 1.10, USD/JPY 115 and AUD/USD 0.85. Most EM FX will weaken against the
dollar. If
anything, we risk underestimating the extent of dollar strength in coming
years.
Dating The Dollar
The dollar tends to follow long-term cycles lasting between 6 to 10 years. A
combination of
valuations extremes, current account imbalances, and turns in rate cycles
and capital flows
tend to presage the switch from one multi-year trend to another. The latest
clearly identifiable
trend for the dollar has been a downtrend that began in 2002 and likely
ended in 2011 thus
lasting 9 years (see Figure 1). This is one year short of the longest trend
in the post-Bretton
Figure 1: USD Uptrend Starting?
100
110
120
130
140
150
160
60
70
80
90
73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Deutsche Bank, EcoWin, BIS.
Turning points
Real Broad Dollar
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Nominal Dollar vs Majors
6yrs,
up 67%
6yrs,
down 18%
10yrs,
down 46%
7yrs,
up 43%
9yrs,
down 40%
(vs majors)
7
Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
Figure 2: Currencies Have Trend Turn Against Dollar At Different Times
1978 USD TWI trough 1985 USD peak
First group
to turn
Second
group
Final group
AUD, NZD (Mar '75)
JPY, CHF, NOK, EUR
(45 months after 1st group)
GBP, SEK
(65m after 1st)
JPY (Nov '82)
EUR, CHF, GBP, SEK, NOK,
NZD (28m after 1st)
AUD, CAD
(40m after 1st)
1995 USD trough 2002 USD peak 2011 USD trough?
NZD* (Jun '88), AUD*
CAD, GBP, SEK, NOK
(45m after 1st)
EUR, JPY, CHF
(80m after 1st)
NZD, EUR, CHF, NOK
(Oct 2000)
AUD, GBP, SEK
(6m after 1st)
JPY, CAD
(15m after 1st)
* The trend turn in the AUD and NZD against the dollar around the 1995 turn
could be dated at different points, I pick the earlier date
Source: Deutsche Bank, Bloomberg
Wood era, which had lasted 10 years (1985-1995).Looking at the dollar
against individual
currencies, we find that that dollar does not turn against all currencies at
the same time. For
example, during the 1995 trend turn up in the dollar trade-weighted index,
the dollar had
earlier turned up against the AUD and NZD, and then some years later turned
up against
CAD, GBP. SEK, NOK and finally the dollar troughed last against the EUR, JPY
and CHF in
1995 (see Figure 2). Interestingly since that period, the JPY has always
been last currency to
peak or trough against the dollar.
If we broaden the universe of currencies to include emerging markets and we
look at the
past few years, all currencies appear to have peaked against the dollar from
a purely
mechanical perspective. That is, they are not currently traded at their
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peaks. It would appear
the first wave of currencies peaked against the dollar in 2008, which
included the euro, while
a second wave appear to have peaked in 2011 (see Figure 3). However, if we
tighten our
definition of currencies that have peaked to only count those that have not
traded within 5%
of their post-2002 highs over the past 3 months; we find that 70% of
currencies have firmly
peaked against the dollar. It would appear Asia-Pac FX is the group of
currencies that has yet
to clearly peak against the dollar. This group includes, the AUD, JPY, SGD
and CNY (see
Figure 4).
It is this group that will likely provide the most definitive sign that the
broad dollar
uptrend has started.
USD/JPY Rise Captures It All
While three months ago, the JPY was within 5% of its highs against the
dollar, it has clearly
and firmly moved much weaker since then. Now it is trading 15% away from its
highs, and
most are confident that the USD/JPY trend has turned up.
Figure 3: Majority of G10+EM Currencies Appear To
Have Peaked Against Dollar
proportion of currencies that have peaked against dollar
100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
02 03 04 05 06 07 08 09 10 11 12 13
Source: Deutsche Bank, EcoWin
Peak defined as high
between 2002 and
2013
Peak defined as high
of last 3m being at
least 5% lower than
previous high*
* Yet to peak with 5% rule:
CNY, THB, PHP, SGD, TWD,
MYR, NZD, AUD, JPY
Figure 4: Dollar Yet To Firmly Turn Up Against Asia-Pac
FX
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100
110
40
50
60
70
80
90
Source: Deutsche Bank, Bloomberg
USD/CNY (rhs)
USD/JPY
(rebased, lhs)
USD/SGD
(rebased, lhs)
USD/AUD (rebased, lhs)
02 03 04 05 06 07 08 09 10 11 12 13
6.00
6.50
7.00
7.50
8.00
8.50
CAD, GBP (Nov '07)
EUR, SEK, NOK
(6m after 1st)
JPY, CHF, AUD, NZD
(45m after 1st)
Page 6
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28 February 2013 Exchange Rate Perspectives
Figure 5: USD/JPY Broken Away From Rate Differentials
100
105
110
115
75
80
85
90
95
08
09
Source: Deutsche Bank, EcoWin
10
11
12
13
USD/JPY (lhs)
2y spread (bps,rhs)
200
100%
150
100
50
0
20%
40%
60%
80%
-100%
-80%
-60%
-40%
-20%
0%
75 78 81 84 87 90 93 96 99 02 05 08 11
Source: Deutsche Bank, Bloomberg
The significance of the USD/JPY turn higher should not be understated. It is
perhaps the only
currency pair that has captured all the major macro themes since the 2008:
an aversion to
crisis-prone regions, ultra-easy Fed policy, the Euro-area crisis, and the
investment boom in
China. All these have until recently been positive for the yen against the
dollar, and indeed
contributed to the all-time high seen in the yen. The fact that the yen has
now so decisively
turned lower suggests markets are entering a new regime.
The notable shifts in market behaviour include the complete breakdown of the
relationship
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between relative interest rates and USD/JPY (see Figure 5) and the declining
correlation
between the dollar and equities, such that the dollar is no longer weakening
in "risk-on"
periods (see Figure 6).
On the macro side, 2011 marked the period when US growth more clearly
established a lead
over Euro-area growth (see Figure 7). Since then, US investors have reduced
their buying of
foreign equities (see Figure 8). This capital flow is perhaps the most
important one to track
the beginning of dollar uptrends (see Exchange Rate Perspectives, December
2012). The end
of 2012 has likely seen the low in real US yields, which has trended down
since 2008 (see
Figures 9,10). This suggests the Fed is unlikely to do further easing
measures. And even if it
Figure 7: US Growth Firmly Above Euro-Area's
10
-6
-4
-2
0
2
4
6
8
real GDP growth, rolling y/y, consensus forecasts used
for 2013, Germany used pre-EMU
Figure 8: US Investors Buying Less Abroad
USD TWI (lhs)
100
110
120
130
140
73 75 77 79 81 83 85 87 89 91 94 96 98 00 02 04 06 08 10 12
US
Euro-area
Source: Deutsche Bank, EcoWin
70
80
90
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Bloomberg
US purchases of foreign equities (inverted,
24mms, % of GDP, rhs)
-0.5%
0.0%
0.5%
1.0%
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1.5%
2.0%
Figure 6: Record Negative Correlation Between Dollar
and Stocks Reversing Suggests Regime Change
2y correlation between USD TWI and S&P500
using ly rolling returns
using levels
Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
.Figure 9: US Real Yields Turning Up
-2
-1
0
1
2
3
4
5
US lOy real yields (lhs)
US unemployment rate, inverted
(rhs)
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Deutsche Bank, EcoWin
3
4
5
6
7
8
9
10
11
Figure 10: Lowest US Real Yields Outside Of Inflation
Spikes Since 1800
10
20
30
-30
-20
-10
0
1800 1825 1850 1875 1900 1925 1950 1975 2000
Inflation
10 yields minus inflation
Source: deutsche Bank, EcoWin
did, currency markets are no longer reacting as strongly to such measures.
Instead, other
central banks are catching up to Fed easing, such as the BoJ since Abe's
election (or even
earlier the SNB in 2011), are having a distinctly bigger a more negative
impact on their
currencies over the dollar. Finally, the introduction of the OMT by the ECB
in the summer of
2012 has seen the tail risk for the Euro-area significantly reduced.
What Goes Up Must Come Down; The Link To China
A new market regime would imply that many of the trends since 2008 will
likely reverse.
Identifying those trends would also help answer the question of what would
happen if the
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Fed exits QE, which has occupied market participants in recent months.
At the core, two clear trends have been in play since 2008. First, ultra-
easy monetary policy
by the central banks of the crisis-hit economies in the developed world,
notably the Fed and
ECB. Second, emerging market growth outperformance, particularly China.
Moreover, both trends are connected. Indeed, Fed easing has seen US real
yields, and global
liquidity increase, while Chinese growth outperformance has provided a
destination for this
Figure 11: Surge in China Investment And NonConventional
Credit
30%
35%
40%
45%
50%
55%
Investment share of
Chinese GDP (lhs)
% of credit outside of
bank yuan loans (rhs)
0%
10%
20%
30%
40%
50%
60%
78 81 83 85 87 89 91 93 95 97 99 01 03 06 08 10 12
Source: Deutsche Bank, EcoWin
Figure 12: Cross-Border Banking Lending Going To
China
10,000
12,000
2,000
4,000
6,000
8,000
0
84 85 87 89 91 93 95 97 99 01 03 05 07 08 10 12
Source: Deutsche Bank, BIS
foreign claims on borrowers from ($bn):
Developing ex-China (lhs)
China (rhs)
100
200
300
400
500
600
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700
800
0
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Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
Figure 13: Top Ten Change In Cross-Border Bank
Lending
100%
120%
140%
160%
180%
200%
20%
40%
60%
80%
0%
change in foreign claims on borrowers since 2009Q1
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Figure 14: Bottom Ten Change In Cross-Border Lending
change in foreign claims on borrowers since 2009Q1
Source: Deutsche Bank, BIS, I exclude countries that do not have liquid
currencies
Source: Deutsche Bank, BIS
excess liquidity. The investment rate in China has grown annually since
2008, and is currently
the second highest in the world, after the tiny African island nation of Sao
Tome and Principe.
This investment has been funded by non-traditional credit expansion (see
Figure 11.
Moreover, when looking at cross-border bank lending since 2008, the most
rapid growth in
the world has been to Chinese borrowers (see Figure 12). After that, other
Asian countries
and Brazil have seen the biggest increase in borrowing (see Figure 13). The
biggest drops
have been seen to European borrowers (see Figure 14). Other markets that
have benefited
from easy G3 liquidity and Chinese growth has been EM local bonds, "safe-
haven" markets
such as Japan (see Figure 15) and property in prime locations around the
world, like central
London (see Figure 16).
A new market regime would therefore likely see a reversal of many of these
trends or at the
very least a moderation in their pace. From a currency perspective, it adds
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to the case that
Asia-Pac currencies, such as SGD and AUD, have likely seen their peak
against the dollar,
with risks skewed to the downside.
Figure 15: Surge In Foreign Buying Of Japanese Funds
60
70
80
90
100
110
120
130
140
150
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Deutsche Bank, EcoWin
USD/JPY (inverted,lhs)
Money market fund inflows (JPY
tril, cumulative, rhs)
10
20
30
40
50
60
-20
-10
0
Figure 16: Prime London Has Benefited From Post-2008
Regime
£1,000,000
£1,500,000
£2,000,000
£2,500,000
£3,000,000
£3,500,000
£4,000,000
£4,500,000
£500,000
£0
95 96 97 98 99 00 01 02 03 04 05 06 08 09 10 11 12
Source: Deutsche Bank, UK Land Registry
average price of detached house in
prime London (Kensington and Chelsea)
Deutsche Bank AG/London
Page 9
Norway
Netherlands
France
Austria
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Hungary
Portugal
Italy
Ireland
Spain
Greece
China
Indonesia
Thailand
Brazil
Taiwan
Malaysia
Philippines
Hong Kong
India
Singapore
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28 February 2013 Exchange Rate Perspectives
Figure 17: BoJ Balance Sheet Yet To Grow As Fast As
Fed Or ECB
10%
15%
20%
25%
30%
35%
0%
5%
00 02 04 06 08 10 12
Source: Deutsche Bank, EcoWin
Source: Deutsche Bank, EcoWin
CNY, EUR, JPY and the rest: Where Next?
The case for yen weakness is straightforward. We expect
central bank balance sheet as share of GDP
Figure 18: Japan's Narrow Basic Balance of Payments
Very Negative
BoJ
ECB
Fed
"Abenomics" to see a more
aggressive BoJ, perhaps using the 1930s as a template for recovery, when
currency
weakness was a clear support (see FX Strategy Weekly, 15 February, 2013). It
should noted
that the BoJ has yet to expand its balance sheet as much as the Fed or the
ECB since 2008
(see Figure 17). The Bank of England also appears to be itching to ease
policy in part to
weaken the pound, perhaps in response to Abenomics. Outside of BoJ policy,
the narrow
basic balance of payments (current account + FDI) points to clear yen
weakness (see Figure
18). The surge in money market funds inflows should also reverse (see
chart). We expect
USD/JPY to eventually rise to 115 by 2015 (and 100 by year-end and 110 by
end-2014). These
are higher than our previous forecasts.
The negative growth gap with the US, similar interest rates (see Figure 19)
and US investors
buying less equities abroad should weigh on the euro. The ECB is unlikely to
hike with Euroarea
growth close to 0% and with Bo] and BoE actions leading to currency
weakness. And of
course, there are ongoing and well-known issues around the Euro-area crisis.
We look for the
euro to eventually head to 1.10 by 2015 (and 1.20 by year-end and 1.15 by
end-2014).
Figure 19: US/Euro Rate Spreads Sideways
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-1.05
-0.55
-0.05
0.45
0.95
1.45
Source: Deutsche Bank, EcoWin
Detrended USD vs EUR(pre-99 DEM, lhs)
2y rate diff (rhs)
-6
-4
-2
0
2
4
6
8
73 76 79 82 85 88 91 94 97 00 03 06 09 12
Figure 20: CNY Under- and Over-Valued
10
20
30
-40
-30
-20
-10
0
CNY overvaluation based on FEER (black) and BEER (grey)
CNY overvalued
96 97 98 98 99 00 01 02 03 04 05 06 07 08 09 09 10 11 12
to return to lOy ave of current account (FEER)
PPP adjusted for productivity and terms of trade (BEER
Source: Deutsche Bank
Page 10
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28 February 2013 Exchange Rate Perspectives
Figure 21: Almost All FX Weaken When Dollar Strengthens.
levels correlation of currency against narrow dollar trade-weighted index
100%
25%
50%
75%
-75%
-50%
-25%
0%
Source: Deutsche Bank, EcoWin,
We only expect modest CNY appreciation against the dollar. One measure of
valuation points
to only modest undervaluation (see Figure 20). Moreover, the decline in
China's current
account has been quite sharp. If China wishes to see a return of the current
account balance
back to its recent average, then the CNY would have to weaken (see Figure
20).
Importantly, we expect the China-linked currencies such as AUD to weaken to
0.85 by 2015
(and 1.00 by year-end, 0.90 by end-2014). The risks around switching from an
investment-led
growth model to a consumption-base model, that is, China rebalancing,
suggests the risks for
these currencies are to the downside.
Other currencies should broadly follow the dollar. Indeed, past correlations
suggest that most
EM currencies follow the narrow dollar trend (see Figure 21). The main
exception is the
Mexican peso which has tended to strengthen with dollar strength. Some of
the high-yielding
currencies such as TRY, INR, IDR and RUB have tended not to see their spot
move with the
dollar trend.
Through all of these individual currency forecasts, the most important point
is that the 9-10
years of dollar weakness is now behind us, and the beginning of a multi-year
uptrend is
unfolding.
Bilal Hafeez, London,
1995-2011
2002-2011
G10
Asia
EMEA
Latam
EUR JPY GBP CHF SEK NOK AUD NZD CAD PLN CZK HUF RUB TRY ZAR ILS MXN BRL CLP
COP PEN KRW TWD SGD HKD CNY INR IDR PHP THB MYR
Deutsche Bank AG/London
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28 February 2013 Exchange Rate Perspectives
FX Valuation Monitor: Lines in the Sand (PPP)*
Figure 1: The euro is expensive and the dollar
cheap
10
20
30
40
-20
-10
0
34.8533.29
21.65
15.7815.69
11.9
6.60
1.50
AUD NZD CHF CAD NOK EUR GBP SEK JPY USD
-3.24
-10.10
Source: DB FX Research
Figure 3: EUR/USD: The euro is expensive though
remains within the 20% threshold ...
0.6
0.8
1.0
1.2
1.4
1.6
Source: DB FX Research
EUR/USD
PPP EUR/USD
20% Band
0.6
0.8
1.0
1.2
1.4
1.6
73 77 81 85 89 93 97 01 05 09 13
60
70
80
90
Source: DB FX Research
Figure 4: USD/JPY: ...The yen is expensive
100
150
200
250
300
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350
50
73 77 81 85 89 93 97 01 05 09 13
Source: DB FX Research
Figure 5: USD/GBP: as well as sterling ...
0.25
0.35
0.45
0.55
0.65
0.75
0.85
0.95
Source: DB FX Research
20% Band
USD/GBP
PPP USD/GBP
73 77 81 85 89 93 97 01 05 09 13
0.25
0.35
0.45
0.55
0.65
0.75
0.85
0.95
Figure 6: USD/CHF: CHF is expensive
0.8
1.3
1.8
2.3
2.8
3.3
3.8
Source: DB FX Research
*Our measure of relative PPP is calculated using long-term averages from
Jan-80 to Dec-04 and deflating by monthly CPI
differentials. We refer to current spot rates as "cheap" or "expensive" with
explicit reference to this measure of fair valuation;
these statements are not intended in any way to be "buy" or "sell"
recommendations.
20% Band
USD/CHF
PPP USD/CHF
0.7
1.2
1.7
2.2
2.7
3.2
3.7
EFTA01464504
73 77 81 85 89 93 97 01 05 09 13
20% Band
USD/JPY
PPP USD/JPY
50
100
150
200
250
300
350
Figure 2: The dollar is 12% cheap to fair value
100
110
120
130
USDTWI
PPP USDTWI
20% Band
60
70
80
90
100
110
120
130
Page 12
Deutsche Bank AG/London
EFTA01464505
28 February 2013 Exchange Rate Perspectives
Figure 7: USD/CAD: CAD overvaluation is being
unwound
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Source: DB FX Research
20% Band
USD/CAD
PPP USD/CAD
73 77 81 85 89 93 97 01 05 09 13
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Figure 8: USD/AUD: AUD is very expensive, beyond
20% threshold...
0.6
0.9
1.2
1.5
1.8
2.1
Source: DB FX Research
USD/AUD
20% Band
PPP USD/AUD
73 77 81 85 89 93 97 01 05 09 13
0.6
0.9
1.2
1.5
1.8
2.1
Figure 9: USD/NZD: _and so is NZD
Figure 10: EUR/JPY: The euro is close to fair value
against the yen
0.5
1.0
1.5
EFTA01464506
2.0
2.5
3.0
Source: DB FX Research
USD/NZD
20% Band
PPP USD/NZD
73 77 81 85 89 93 97 01 05 09 13
0.5
1.0
1.5
2.0
2.5
3.0
100
150
200
250
300
350
400
450
50
73 77 81 85 89 93 97 01 05 09 13
Source: DB FX Research
EUR/JPY
20% Band
PPP EUR/JPY
50
100
150
200
250
300
350
400
450
Figure 11: EUR/GBP: Sterling is cheap against the
euro
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Source: DB FX Research
EUR/GBP
20% Band
PPP EUR/GBP
EFTA01464507
73 77 81 85 89 93 97 01 05 09 13
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Figure 12: EUR/SEK: SEK is very cheap versus the
euro
10
11
12
4
5
6
7
8
9
Source: DB FX Research
10
11
12
EUR/SEK
20% Band
PPP EUR/SEK
73 77 81 85 89 93 97 01 05 09 13
4
5
6
7
8
9
Deutsche Bank AG/London
Page 13
EFTA01464508
28 February 2013 Exchange Rate Perspectives
FX Behavioral and Fundamental Equilibrium Exchange Rates (BEER and FEER)*
Figure 1: USD-cross BEER and FEER valuations
Source: DB FX Research
Figure 2: EUR/USD is a bit expensive vs. BEER FV
Figure 3: USD/JPY is now fair value vs. BEER FV
Source: DB FX Research
Source: DB FX Research
Figure 5: USD BIS TWI is a bit cheap vs. BEER FV
Figure 4: GBP/USD is very undervalued vs. BEER FV
Source: DB FX Research
Source: DB FX Research
*Sources: BIS, Bloomberg, Deutsche Bank. Notes: For details on model, see
Exchange Rate Perspectives, Jan-13.
BEER model is relative PPP adjusted for terms-of-trade and productivity
effects. Relative FEER model is based on
current account surpluses/deficits relative to long-term (structural)
surpluses/deficits. Over/undervaluation
calculated off TWIs and converted to USD-crosses using matrix algebra. EM
graphs available upon request.
Page 14
Deutsche Bank AG/London
EFTA01464509
28 February 2013 Exchange Rate Perspectives
Figure 6: USD/CAD is cheap vs. BEER FV
Figure 7: AUD/USD is quite expensive vs. BEER FV
Source: DB FX Research
Source: DB FX Research
Figure 8: NZD/USD is very expensive vs. BEER FV
Figure 9: USD/CHF is quite cheap vs. BEER FV
Source: DB FX Research
Source: DB FX Research
Figure 10: USD/NOK is a bit expensive vs. BEER FV
Figure 11: USD/SEK is expensive vs. BEER FV
Source: DB FX Research
Source: DB FX Research
Deutsche Bank AG/London
Page 15
EFTA01464510
28 February 2013 Exchange Rate Perspectives
Figure 12: EUR/USD is cheap vs. FEER FV
Figure 13: USD/JPY is very cheap vs. FEER FV
Source: DB FX Research
Source: DB FX Research
Figure 14: GBP/USD is expensive vs. FEER FV
Figure 15: USD BIS TWI is a bit cheap vs. FEER FV
Source: DB FX Research
Source: DB FX Research
Figure 16: USD/CAD is quite cheap vs. FEER FV
Figure 17: AUD/USD is fair value vs. FEER FV
Source: DB FX Research
Source: DB FX Research
Page 16
Deutsche Bank AG/London
EFTA01464511
28 February 2013 Exchange Rate Perspectives
Figure 18: NZD/USD is a bit expensive vs. FEER FV
Figure 19: USD/CHF is fair value vs. FEER FV
Source: DB FX Research
Source: DB FX Research
Figure 20: USD/NOK is expensive vs. FEER FV
Figure 21: USD/SEK if fair value vs. FEER FV
Source: DB FX Research
Source: DB FX Research
Deutsche Bank AG/London
Page 17
EFTA01464512
28 February 2013 Exchange Rate Perspectives
G10 Capital Flows and Basic Balance Monitor
United States (USD bn)
Figure 1: The basic balance is on a recovery path over
the last one year
Figure 2: as non treasury portfolio outflows have
remain positive
Source: DB FX Research and US Treasury
Source: DB FX Research and US Treasury
Figure 3: The private basis balance has been diverging
from the overall balance
Figure 4:as official inflows become significant
Source: DB FX Research and US Treasury
Source: DB FX Research and US Treasury
Figure 5: Official inflows inversely correlated with
private inflows since the late 1990s
Figure 6: Relative to the private basic balance, the
dollar is expensive
Source: DB FX Research and Haver
Source: DB FX Research and US Treasury
Page 18
Deutsche Bank AG/London
EFTA01464513
28 February 2013 Exchange Rate Perspectives
Figure 7: Net FDI outflows accelerate
Figure 8: Portfolio flows were driven mostly by net
bond flows, while net equity flows remain modest
Source: DB FX Research and US Treasury
Source: DB FX Research and US Treasury
Figure 9: Official sector buying of US bonds are now
almost equal to private buying
Figure 10: Treasury purchase by private sector has
fallen substantially
Source: DB FX Research and US Treasury
Source: DB FX Research and US Treasury
Figure 11: No clear relationship between USD TWI
and UST purchases
Figure 12: Net equity flows remain positive
Source: DB FX Research and US Treasury
Source: DB FX Research and US Treasury
Deutsche Bank AG/London
Page 19
EFTA01464514
28 February 2013 Exchange Rate Perspectives
Figure 13: Equity flows tend to respond with a lag to
market performance
Figure 14: The dollar is increasingly following net
equity flows
Source: Deutsche Bank, US Treasury and Bloomberg Finance LP
Source: Deutsche Bank, US Treasury and Bloomberg Finance LP
Figure 15: Generally inverse link between foreign
interest in USTs versus US equities
Figure 16: The dollar and agency & corp bond inflows
Source: Deutsche Bank and US Treasury
Source: Deutsche Bank, US Treasury and Bloomberg Finance LP
Page 20
Deutsche Bank AG/London
EFTA01464515
28 February 2013 Exchange Rate Perspectives
Canada (CAD bn)
Figure 1: The basic balance has generally been in a
downtrend since 2007
Figure 2: as net FDI outflows continue
Source: DB FX Research and Haver
Source: DB FX Research and Haver
Figure 3: Portfolio inflows seem to have peaked after
an upsurge since 2008
Figure 4: as foreign interest in Canadian securities has
fallen from record highs
Source: DB FX Research and Haver
Source: DB FX Research and Haver
Figure 5: Net equity outflows continue unabated
Figure 6: .while net debt inflows have started
moderating from record highs.
Source: DB FX Research and Haver
Source: DB FX Research and Haver
Deutsche Bank AG/London
Page 21
EFTA01464516
28 February 2013 Exchange Rate Perspectives
Japan (JPY trillion)
Figure 1: The negative basic balance has been
accelerating recently...
Figure 2: _as net FDI outflows gather momentum
Source: DB FX Research, MOF, and Haver
Source: DB FX Research and MOF
Figure 3: Net capital inflows have turned negative
Figure 4: Net bond outflows have accelerated
Source: DB FX Research and MOF
Source: DB FX Research and MOF
Figure 5: Net equity flows have turned positive
Figure 6: While Net money-market inflows have fallen
substantially
Source: DB FX Research and MOF
Source: DB FX Research and MOF
Page 22
Deutsche Bank AG/London
EFTA01464517
28 February 2013 Exchange Rate Perspectives
United Kingdom (GBP bn)
Figure 1: The basic balance remains negative
Figure 2: Net FDI inflows have turned course
Source: DB FX Research and Haver
Source: DB FX Research and Haver
Figure 3: Portfolio flows remain negative
Figure 4: Net equity and net debt positions
Source: DB FX Research and BoE
Source: DB FX Research and Haver
Figure 5: Net holdings of equities
Figure 6: Net debt holdings
Source: DB FX Research and BoE
Source: DB FX Research and BoE
Deutsche Bank AG/London
Page 23
EFTA01464518
28 February 2013 Exchange Rate Perspectives
Euro area (EUR bn)
Figure 1: The basic balance has turned positive...
Figure 2: ...as current account surplus outweigh the
net FDI outflows
Source: DB FX Research and Eurostat
Source: DB FX Research and Eurostat
Figure 3: EUR/USD strongly correlated (0.88) with
bilateral basic balance with the US
Figure 4: Bilateral basic balance explains 84% of
EUR/USD movements since inception of the euro
Source: DB FX Research and Eurostat
Source: DB FX Research and Eurostat
Figure 5: The bilateral basic balance with the US has
moved in favor of the US recently...
Figure 6: ...as US purchases of euro area bonds have
continued to be replaced by sales
Source: Deutsche Bank and US Treasury
Source: DB FX Research and Eurostat
Page 24
Deutsche Bank AG/London
EFTA01464519
28 February 2013 Exchange Rate Perspectives
Figure 7: Net portfolio inflows have turned marginally
positive...
Figure 8: _as equity market inflows outpace the
money market outflows
Source: Deutsche Bank and European Central Bank
Source: Deutsche Bank and European Central Bank
Figure 9: Equity inflows have tracked the STOXX
Figure 10: Foreign interest on the bond side boomed
in late 2006 and has slowed now
Source: Deutsche Bank, Bloomberg and European Central Bank
Source: Deutsche Bank and European Central Bank
Deutsche Bank AG/London
Page 25
EFTA01464520
28 February 2013 Exchange Rate Perspectives
Australia (AUD bn )
Figure 1: The basic balance remains positive...
Figure 2: ...as net FDI inflows continue to climb
Source: DB FX Research and RBA
Source: DB FX Research and RBA
Figure 3: Net Portfolio flows have been falling since
2010
Figure 4: Foreign investors have favored Australian
debt (negative IIP a liability for AU)_
Source: DB FX Research and RBA
Source: DB FX Research and RBA
Figure 5: ...and to a lesser extent equities...
Figure 6: ...with relatively modest purchases by
Australians of foreign debt
Source: DB FX Research and RBA
Source: DB FX Research and RBA
Page 26
Deutsche Bank AG/London
EFTA01464521
28 February 2013 Exchange Rate Perspectives
New Zealand (NZD bn )
Figure 1: The basic balance
Figure 2: FDI flows
Source: DB FX Research and Haver
Source: DB FX Research and Haver
Figure 3: Net Portfolio inflows have switched to
negative territory
Figure 4: Foreign appetite for government bonds
Source: DB FX Research and Haver
Source: DB FX Research and NZ FinMin
Deutsche Bank AG/London
Page 27
EFTA01464522
28 February 2013 Exchange Rate Perspectives
Commodity Price and Currency Monitor
Figure 6: CRB Commodity Prices and components
1100
1300
100
300
500
700
900
Raw industrial
Foodstuffs
Metals
Livestock and products,(rhs)
Fats and Oil,(rhs)
CRB Commodity Prices,(rhs)
100
200
300
400
500
600
700
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Source: DB FX Research, Haver
Figure 3: Precious metals
1000
1500
2000
2500
500
0
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Gold Price (US$/Troy oz)
Platinum Price ($/Troy oz)
Palladium Price ($/Troy oz)
Silver Price ($/Troy oz) ,(rhs)
13
18
23
28
33
38
43
48
3
8
Source: Deutsche Bank, Haver
Figure 4: Industrial metals
10000
2000
EFTA01464523
4000
6000
8000
0
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Source: Deutsche Bank, Haver
Source: Deutsche Bank, Haver
Figure 5: Commodity Currencies and Prices
0.35
0.50
0.65
0.80
0.95
1.10
AUD/USD
CAD/USD
NZD/USD
CRB (Rs)
200
250
300
350
400
450
500
550
600
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
Source: Deutsche Bank, Haver
Figure 6: The dollar cycle and global growth cycle
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
yoy,%
Correlation over entire sample = -0.07
Correlation from May 2000 = -0.01
Ln
World IP
USTW$, inverted,(rhs)
4.2
4.3
4.4
4.5
4.6
4.7
4.8
EFTA01464524
4.9
5
Jan-81 Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan -05 Jan-09 Jan-13
Aluminium Price ($/Metric Tonne)
Copper Price ($/Metric Tonne)
Lead Price ($/Metric Tonne)
Zinc Price ($/Metric Tonne)
Nickel Price ($/Metric Tonne),(rhs)
Tin Price ($/Metric Tonne),(rhs)
10000
20000
30000
40000
50000
60000
0
Figure 2: Energy prices
100
120
140
160
20
40
60
80
0
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jan12
Jan13
Oil
Price(WTI, $/barrel)
Natural Gas ($/mmbtu),(rhs)
12
16
0
4
8
Page 28
Deutsche Bank AG/London
EFTA01464525
28 February 2013 Exchange Rate Perspectives
Figure 7: Nominal CRB and World IP Growth
5.3
5.5
5.7
5.9
6.1
6.3
6.5
Ln
Nominal CRB Index
World industrial Production(rhs)
yoy,%
10
15
-15
-10
-5
0
5
Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13
Source: Deutsche Bank, Haver
Figure 8: Nominal CRB and the Dollar
5.3
5.5
5.7
5.9
6.1
6.3
6.5
Ln
Nominal CRB Index
USTW$,inverted,(rhs)
Ln
4.20
4.30
4.40
4.50
4.60
4.70
Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13
Source: Deutsche Bank, Haver
Figure 9: Long -run Relationship- Nominal CRB
Figure 10: Long-run Relationship- Oil
4.8
5.1
5.4
5.7
6.0
6.3
6.6
EFTA01464526
Long-run elasticities:
TWI: -1.88,
World IP: 5.81
Real Interest Rate: -0.03
Ln
Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13
Nominal CRB Index
Fitted Nominal CRB Index
Source: Deutsche Bank, Haver
4.8
5.1
5.4
5.7
6.0
6.3
6.6
5.2
Ln
4.6
Elasticities:
Major TWI: -2.56
World IP: 0.03
R-square: 0.80
4
3.4
Oil Price
Fitted Oil Price
2.8
May-00 May-03 May-06 May-09 May-12
Source: Deutsche Bank, Haver
5.2
4.6
4
3.4
2.8
Figure 11: RBA Commodity Price Index (Nominal) and
AUD/USD
1.1
0.5
0.6
0.7
0.8
0.9
1
Source: Deutsche Bank, Haver
AUD (lhs)
RBA Commoditiy Price Index (rhs)
100
125
150
175
EFTA01464527
25
50
75
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
Figure 12: Long-run Relationship-AUD/USD
-0.7
-0.5
-0.3
-0.1
0.1
0.3
AUD
Long Run Relationship
Long-run elasticities:
Commodity Price: 0.41
US GDP: -0.48
88 90 92 94 96 98 00 02 04 06 08 10 12
-0.7
-0.5
-0.3
-0.1
0.1
0.3
Deutsche Bank AG/London
Page 29
EFTA01464528
28 February 2013 Exchange Rate Perspectives
Figure 13: ANZ Commodity Price Index (Nominal) and
NZD/USD
0.35
0.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
250
NZD (lhs)
ANZ Commodity Prices Index (rhs)
200
150
100
50
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Figure 14: Long-run Relationship-NZD/USD
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
NZD
Long Run Relationship
Long-run elasticities:
Commodity Price: 0.77
GDP: 1.08
-0.9
-0.7
-0.5
-0.3
-0.1
0.1
88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
Source: Deutsche Bank, Haver
Figure 15: BoC Commodity Price Index (Nominal) and
CAD/USD
0.60
0.70
0.80
0.90
1.00
EFTA01464529
1.10
CAD (lhs)
BoC Commodity
Price Index
200
300
400
500
600
700
800
900
1000
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Figure 16: Long-run Relationship-CAD/USD
0.10
CAD
Long Run Relationship
0.20
-0.10
0.10
-0.30
0.00
-0.50
Long-run elasticities:
Commodity Price: 0.13
GDP: 1.32
88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
Figure 17: BoC Non-Energy Commodity Price Index
(Nominal) and CAD/USD
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
CAD (lhs)
BoC Non-Energy Commodity Price Index (rhs)
100
200
300
400
500
600
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
EFTA01464530
Source: Deutsche Bank, Haver
Figure 18: BoC Energy Commodity Price Index
(Nominal) and CAD/USD
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
Source: Deutsche Bank, Haver
CAD (lhs)
BoC Energy Commodity Price Index (rhs)
100
600
1100
1600
2100
2600
86 88 90 92 94 96 98 00 02 04 06 08 10 12
-0.10
Page 30
Deutsche Bank AG/London
EFTA01464531
28 February 2013 Exchange Rate Perspectives
Figure 19: RBA Commodity Price (Nominal)
100
125
150
175
25
50
75
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
RBA Commodity Price Index (Nominal)
Average
25
50
75
100
125
150
175
Figure 20: RBA Commodity Price (Real)
4.25
4.5
3.75
4
3.25
3.5
2.75
3
2.5
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
RBA Commodity
Price Index (Real)
Average
Linear Trendline
y = 3E-05x + 2.4145
R, = 0.0709
4.25
4.5
3.25
3.5
3.75
4
2.5
2.75
3
Figure 21: ANZ Commodity Price (Nominal)
110
130
150
EFTA01464532
170
190
210
230
250
90
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
Source: Deutsche Bank, Haver
ANZ Commodity Price Index (Nominal)
Average
110
130
150
170
190
210
230
250
90
4
86 88 90 92 94 96 98 00 02 04 06 08 10 12
4
Figure 22: ANZ Commodity Price (Real)
4.8
4.6
y = -8E-06x + 4.5974
R, = 0.0225
4.4
ANZ Commodity Price Index (Real)
Average
Linear Trendline
4.8
4.6
4.4
4.2
4.2
Figure 23: BoC Commodity Price (Nominal)
200
400
600
800
1000
0
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
BoC Commodity
Price Index
(Nominal)
Average
200
EFTA01464533
400
600
800
1000
0
Figure 24: BoC Commodity Price (Real)
6.2
5.2
5.4
5.6
5.8
6
4.8
5
Source: Deutsche Bank, Haver
Linear Trendline
BoC Commodity Price Index
(Real)
Average
6.2
y = -3E-05x + 6.3235
R2 = 0.1719
86 88 90 92 94 96 98 00 02 04 06 08 10 12
5.2
5.4
5.6
5.8
6
4.8
5
Deutsche Bank AG/London
Page 31
EFTA01464534
28 February 2013 Exchange Rate Perspectives
Figure 25: BoC Non-Energy Commodity Price
(Nominal)
100
150
200
250
300
350
400
450
500
Source: Deutsche Bank, Haver
BoC Non-Energy Commodity Price Index
Average
100
150
200
250
300
350
400
450
500
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Figure 26: BoC Non- Energy Commodity Prices (Real)
4.5
4.8
5.1
5.4
5.7
6
BoC Non- Energy Commodity
Price Index (Real)
Average
Linear Trendline
y = -5E-05x + 6.9082
R, = 0.6033
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
4.5
4.8
5.1
5.4
5.7
6
Figure 27: BoC Energy Commodity Price (Nominal)
500
1000
1500
2000
EFTA01464535
2500
0
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
BoC Energy Commodity Price Index
Average
500
1000
1500
2000
2500
0
Figure 28: BoC Energy Commodity Price (Real)
7.5
6.5
7
5.5
6
5
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
BoC Energy Commodity
Price Index (Real)
Average
Linear Trendline
7.2
7.4
6.2
6.4
6.6
6.8
7
y = 2E-05x + 5.5486
R, = 0.0292
5.2
5.4
5.6
5.8
6
5
Figure 29: Commodity Price Indices
130
180
230
280
330
380
430
480
530
80
EFTA01464536
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
RBA Commodity Price Index (Nominal)
ANZ Commodity Price Index (Nominal)
BoC Commodity Price Index (Nominal)
Jan 1986 =100
130
180
230
280
330
380
430
480
530
80
Figure 30: Ratio of Commodity Price Indices
2.3
Ratio of Australia to
NZ Commodity Price
Indicies (Nominal)
1.9
1.5
1.2
1.1
0.7
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: Deutsche Bank, Haver
0 7
Ratio of Canada to NZ
Commodity Price
Indicies (Nominal)
2.2
1.7
Page 32
Deutsche Bank AG/London
EFTA01464537
28 February 2013 Exchange Rate Perspectives
U.S. Trade Balance Monitor
Fig 1: The US trade deficit has started a mild
recovery
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
Jan-92
USD Bn
Annualized Trade Balance
Annualized Trade Balance,3m
Sum
Annualized Trade
Balance,12m Sum
Jan-96
Source: DataStream, Deutsche Bank.
Fig 3: The narrowing in the deficit reflected a
outpacing of import growth by export growth
15
25
-35
-25
-15
-5
5
10
20
30
Export Value Growth
Import Value Growth
Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12
Source: DataStream, Deutsche Bank
Fig 5: Export prices tend to follow the dollar
12
yoy,%
-12
-8
-4
0
4
8
Ln
u
Export Price
EFTA01464538
Jan-94 Nov-96 Sep-99 Jul-02 May-05 Mar-08 Jan-11
USTRBROA,inverted
(rhs)
Source: DataStream, Deutsche Bank
4.30
4.40
4.50
4.60
4.70
4.80
-40
-30
-20
-10
0
Jan-00
Jan-04
Jan-08
Jan-12
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
Fig 2: US and world growth recovery has lost
momentum
10
15
-15
-10
-5
0
5
yoy,%
10
15
World IP ex US IP
(YoY)
US IP (YoY)
Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12
Source: DataStream, Deutsche Bank
Fig 4: Recently export prices have receded sharply
while export volumes remain at the same level
10
15
20
EFTA01464539
-20
-15
-10
-5
0
5
12
yoy,%
u
Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12
Export Volume
Export Price(rhs)
-12
-6
0
6
-15
-10
-5
0
5
Source: DataStream, Deutsche Bank
Fig 6: Export volume growth closely follows
external demand
10
15
20
-20
-15
-10
-5
0
5
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Export Volume
World IP ex US IP(rhs)
Source: DataStream, Deutsche Bank
15
yoy,%
5
-5
-15
Deutsche Bank AG/London
Page 33
EFTA01464540
28 February 2013 Exchange Rate Perspectives
Fig 7: Export volumes have remained below trend
since 2001
4.4
4.5
4.6
4.7
4.8
4.9
7.6
Ln
Real Broad TWI
Ln
7.1
6.6
6.1
5.6
Fig 8: Export volume deviations from trend
strongly correlated with moving average of dollar
valuation
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
USDTWI,Deviations from Trend (8 Quarter
MA),inverted
Real Exports,Deviation from Trend (rhs)
Ln
Correlation = - 0.67
-0.25
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
Source: DataStream, Deutsche Bank
Source: DataStream, Deutsche Bank
Fig 9: A brief end to the dollar upsurge seems to
have boosted export volume growth
10
20
EFTA01464541
-20
-10
0
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Source: DataStream, Deutsche Bank
Fig 11: Import price inflation has followed the
dollar
10
15
20
25
-20
-15
-10
-5
0
5
yoy,%
-12
-7
-2
3
8
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Import Price
USTRBROA,inverted(rhs)
Source: DataStream, Deutsche Bank
Source: DataStream, Deutsche Bank
13
yoy,%
Export Volume
USTRBROA,inverted(rhs)
Ln
4.30
4.40
4.50
4.60
4.70
4.80
Fig 10: The recent sharp increase in import price
inflation has tapered off during the past few
months
10
15
20
-20
-15
-10
-5
0
5
EFTA01464542
Jan-92
yoy,%
12
17
22
Import Volume
Import Price (rhs)
Jan-96
Jan-00
Source: DataStream, Deutsche Bank
Fig-12: Import volume growth has generally been
highly correlated with US domestic demand
growth
10
15
20
-25
-20
-15
-10
-5
0
5
Jan-94
10
yoy,%
Import Volume
US IP(rhs)
Jan-98
Jan-02
Jan-06
Jan-10
-15
-10
-5
0
5
Jan-04
Jan-08
Jan-12
-18
-13
-8
-3
2
7
Page 34
Deutsche Bank AG/London
Mar-80
Mar-84
Mar-88
EFTA01464543
Mar-92
Mar-96
Mar-00
Mar-04
Mar-08
Mar-12
Dec-81
Dec-85
Dec-89
Dec-93
Dec-97
Dec-01
Dec-05
Dec-09
EFTA01464544
28 February 2013 Exchange Rate Perspectives
Fig 13: U.S. Exports and Imports of Goods and Services (Balance of Payments
Basis) (last 13 months)
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oc t Nov Dec
201220122012201220122012
Units 2011201120112012201220122012
Exports
Imports
(US$ bn.) 177.8 178.6 180.2 184.7 182 5 183.1 185.5 183.3 181.5 187.1 180.6
182.5 186.4
(US$ bn.) 229.5 230.9 224.7 236.4 232 2 230.1 226.5 225.0 224.2 227.5 222.8
231.1 224.9
Trade Balance (US$ bn.)
Export & Import Growth
Exports
Imports
Growth Differential
-51.7 -52.3 -44.6 -51.7 -49.7 -47.0 -40.9 -41.7 -42.7 -40.4 -42.2 -48.6 -38.5
(y-o-y%) 7.4% 6.3% 8.2% 6.0% 3.9% 4.2% 7.5% 2.8% 1.7% 3.6% 1.0% 3.3% 4.9%
(y-o-y%) 11.3% 7.1% 6.3% 7.9% 5.9% 3.0% 1.6% 0.5% 0.5% 1.1% -0.7% 2.5% -2.0%
-3.9% -0.8% 1.8% -1.9% -2.0% 1.2% 5.9% 2.3% 1.3% 2.5% 1.8% 0.8% 6.8%
Fig 14: U.S. Export and Import Orders (ISM Survey) (last 13 months)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
201220122011201220122013
Units 2010201120122012201220122012
Export Orders
Import Orders
Exp.-Imp. Orders
(index)
(index)
52.0
49.0
3.0
53.0
54.0
-1.0
55.0
52.5
2.5
59.5
54.0
5.5
54.0
53.5
0.5
59.0
53.5
5.5
53.5
53.5
0.0
EFTA01464545
47.5
53.5
-6.0
46.5
50.5
-4.0
47.0
49.0
-2.0
48.5
49.5
-1.0
48.0
47.5
0.5
47.0
48.0
-1.0
Fig 15: Regional Breakdown of U.S. Trade Balance (US$ bn.) (1998-2010)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Canada-51.9 -52.8 -48.2 -51.7 -66.5 -78.5 -71.8 -68.2 -78.3 -21.6 -28.5
-34.5 -31.8
Mexico
Brazil
-24.6 -30.0 -37.1 -40.6 -45.2 -49.9 -64.5 -74.8 -64.7 -47.8 -66.4 -64.5 -61.3
-3.4
1.5
U.K.-1.8
Japan
China
Hong Kong
South Korea
Singapore
Taiwan
U.S. Total
1.4
-7.5
4.4
3.3
1.4
-6.7
-9.0
4.7
1.4
-7.3
-9.1
-10.4 -12.5
6.5
-1.4
4.0
7.5
EFTA01464546
5.4
-7.5
-8.1
98
6 1
-1.5
-6.9
1.8
-5.0
6.0
-1.8
11.5
-1.4
11.2
4.6
11.6
Western Europe -59.4 -64.8 -88.4 -98.9 -112.8 -125.6 -118.5 -109.0 -93.9
-61.1 -60.8 -63.2 -66.4
Germany
-29.1 -29.1 -35.9 -39.3 -45.8 -50.6 -47.9 -44.7 -43.0 -28.2 -34.
ℹ️ Document Details
SHA-256
84f556a6749b76e5c2f55ed33b50aecc5327f359530a484e9d74f877e67bb833
Bates Number
EFTA01464478
Dataset
DataSet-10
Document Type
document
Pages
92
Comments 0