FX: Assessing The Financial Fallout

September 2008 | Market Strategy

As the global financial turmoil continues to unfold, claiming further victims this week, like insurance heavyweight AIG, UK bank HBOS, and with news surfacing that Washington Mutual (WM) has put itself up for auction over the past few days, global risk aversion is climbing at a phenomenal rate. The latest spike in volatility, with the VIX index jumping by some 41% this week alone, has thrown growing uncertainty over our core market assumptions, forcing us to take a deeper look at some of our key FX views in the region. After smashing through our BRL1.8500/US$ target in recent trading, the Brazilian real is now looking to break out of its current trading range, and will likely test key support at BRL1.9000/US$ in today's trading. The Colombian peso has lost almost 12% against the dollar so far this month, moving closer towards long-term neckline support at COP2,250/US$. One of the most precarious-looking currencies in the region is the Chilean peso, which broke out of its previous trading range, taking out key support at CLP540.00/US$ in recent trading.

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