20140218-巴黎银行证券-BNP_Paribas_STEER__12页_1mb

BNP Paribas STEER™ Summary

Core Content

BNP Paribas STEER™ is a short-term equilibrium exchange rate model that evaluates the fair value of currency pairs based on interest rates, equity markets, and commodity prices. The model is used to identify over- or under-valuation and provide insights into potential exchange rate movements. The report highlights the current status of G10 and Emerging Market (EM) currencies relative to their STEERs.

Main Points

G10 Currencies

• USDCAD is the only significantly overvalued G10 currency, with a fair value of 1.0785 and a z-score deviation of 1.89. It is expected to decline further.
• EURUSD is overvalued (1.2 z-scores) but has not triggered a bearish signal. The pair is closely monitored for a break of the top of the corridor at 1.3740.
• GBPUSD has been in line with its STEER, which has increased due to favorable short-term fundamentals, particularly the rise in the UK 2-year interest rate swap.
• GBPUSD is sensitive to UK interest rates, global equities, and US yields. Three scenarios are outlined:
  • If UK 2-year swap rate reaches 1.10%, GBPUSD fair value is 1.6800.
  • If UK rates reach 1.10% and global equities rise 5%, GBPUSD fair value is 1.7050.
  • If US yields rise to 55bp, GBPUSD may decline to 1.6195.
• AUDUSD and NZDUSD are trading close to their STEERs, with minimal deviations.
• EURNOK and EURAUD have shown narrowing deviations, with profits booked on short positions.

Emerging Market Currencies

• USDRUB and USDILS are overvalued, with fair values at 34.45 and 3.4890 respectively. Both have potential for decline.
• EURPLN is undervalued and may rebound to 4.1725.
• USDSGD and USDTHB are undervalued and have room to rise, with fair values at 1.2730 and 32.64 respectively.
• USDTWD is overvalued but does not pass the cointegration filter, suggesting lower forecasting power.
• USDCOP is overvalued and may decline further to 1996.
• USDCLP is vulnerable to a decline due to strong Chilean equity performance.
• USDPEN is moving towards its STEER but still has potential for further decline.
• USDBRL and USDMXN are trading close to their STEERs.

Key Information

• Z-Score Interpretation: A z-score greater than 1.5 indicates a significant misalignment and potential for exchange rate movement. Overvaluation suggests a likely decline, while undervaluation suggests a potential rise.
• Scenario Analysis: Used to assess GBPUSD based on underlying fundamentals, showing its sensitivity to global markets and US yields.
• Market Sensitivity: The report emphasizes the sensitivity of exchange rates to interest rate differentials, equity performance, and commodity prices.
• Trading Strategy: A simple strategy of buying undervalued currencies and selling overvalued ones has historically been successful, with a Sharpe ratio of around 0.9.

Summary Table

Forecast Bias

• ↑ indicates the pair is undervalued and may rise.
• ↓ indicates the pair is overvalued and may decline.
• - indicates no significant forecast bias.

Conclusion

The BNP Paribas STEER™ model provides a framework for evaluating short-term fair values of currencies and identifying potential movements. The report suggests that USDCAD is the most overvalued G10 pair, with a clear potential for decline. In the EM space, several currencies are either overvalued or undervalued, indicating varied opportunities for traders. The model also highlights the importance of interest rate differentials and equity performance in driving exchange rates.