January 31, 2019 / 10:18 AM / 4 months ago

Citi: Time to add to EM FX risk, focus on CEEMEA high-yielders

FILE PHOTO: A Citibank branch is seen in Santa Monica, California, U.S. March 19, 2018. REUTERS/Lucy Nicholson

LONDON (Reuters) - Investment bank Citi said on Thursday it was time to raise emerging market FX risk in portfolios, citing the aggressive compression in real bond yields in the United States.

High yielding currencies of central Europe, the Middle East and Africa looked especially attractive in this environment, the bank told clients.

“It feels like the exact inverse of Q3 last year when US monetary and financial conditions were flirting with a more pronounced tightening,” Citi’s Luis Costa wrote in a note.

Citi said it had put on a new short position on the dollar versus rand at 13.34 with a target of 12.90, while adding one percent to its Turkish lira position. It is also long on Russia’s rouble verus a half-euro, half-dollar basket, having a target of 62.50 for the rouble against the dollar, and 73.00 against the euro.

Reporting by Karin Strohecker; editing by Sujata Rao

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