20180831-法国巴黎银行-DTCC_positioning__Oversold_values_across_the_board__BRL_and_ARS_reach_extreme_oversold_levels__12页_601kb

Summary of Latin America Strategy Report

Core Content

This report provides an analysis of the FX positioning in Latin America, focusing on the impact of recent EM/Latam FX depreciation on currency markets, particularly the Brazilian real (BRL), Argentine peso (ARS), Chilean peso (CLP), Colombian peso (COP), and Peruvian sol (PEN). The analysis is based on data from the Depository Trust & Clearing Corp. (DTCC) positioning monitor and FX options market activity.

Key Currencies and Their Positioning

Brazilian Real (BRL)

• DTCC Positioning:
  • Current positioning score for BRL has moved above the 90th percentile, reaching the highest level since May 2017.
  • The non-parametric probability distribution indicates a 1.8% historical probability of this level.
• Options Market Activity:
  • A considerable increase in the volume-weighted strike gap for put options was observed before the BRL appreciation in July.
  • The gap has widened again, suggesting a potential reversal of the depreciation trend.
• Derivatives Market:
  • Speculators are heavily long USDBRL, with a record high level of long USD positions.
  • Combined positions of local and non-resident investors in the derivatives market are at multi-year record levels, totaling USD 67.4bn.
  • Local institutional investors have an allocation of USD 17.1bn in SCS (FX Swap with Periodic Adjustment Based on One-Day Repo Operations).

Argentine Peso (ARS)

• DTCC Positioning:
  • USDARS positioning has reached record high levels.
  • The non-parametric probability distribution indicates a 0.2% historical probability.

Chilean Peso (CLP)

• DTCC Positioning:
  • CLP positioning score has increased since last month, reaching the highest overbought levels since May 2018.
  • Non-parametric probability is at 7.2%, supporting a short EURCLP position opened in July.

Colombian Peso (COP)

• DTCC Positioning:
  • USDCOP positioning remains near overbought levels after a recent retracement.
  • The team increased its long COP position when the score reached extreme levels on 17 August.

Peruvian Sol (PEN)

• DTCC Positioning:
  • USDPEN positioning remains broadly unchanged around neutral levels.
  • It has had little correlation with the currency's performance.

Main Views

• BRL:
  • If global financial conditions improve, the current extreme oversold levels and heavy long positions suggest a potential rally.
  • The option market is pricing a 68% probability of a small BRL appreciation (3%) and a 32% probability of a substantial depreciation (6%) in the context of the Brazilian elections.
• ARS:
  • At record high levels of USDARS positioning, suggesting a strong bias towards the peso.
• CLP and COP:
  • Both currencies show overbought levels, indicating possible short-term corrections or reversals.
• PEN:
  • Neutral positioning suggests no strong directional bias from the options market.

Technical Insights

• The positioning score for USDBRL is consistently correlated with the NDF market performance.
• The volume-weighted strike gap for put options has historically preceded BRL appreciation, and the current levels suggest a potential reversal of the depreciation trend.
• Similar patterns are observed in the MXN market, where an increase in the put strike gap before appreciation has been noted.

Legal and Compliance Notes

• This document is a marketing communication and not investment research.
• It may contain "Research" as defined under MiFID II unbundling rules, intended for firms in scope of the rules that have signed up to BNPP Global Markets Research packages, or firms out of scope.
• The document is not intended for non-Relevant Persons.
• BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• The document does not constitute an offer to sell or purchase any financial instruments.
• It is subject to legal disclaimers regarding accuracy, completeness, and liability.

Disclaimer

• The information and opinions are based on public sources and may not be independently verified.
• Performance data may be based on back-testing and is not indicative of future results.
• BNPP does not provide investment, financial, legal, or tax advice.
• The document is confidential and may not be reproduced or distributed without prior written consent.
• It is intended for the general information of BNPP's clients and is a general solicitation of derivatives business.

Additional Information

• The report includes charts and data sources from Bloomberg LLP and BNP Paribas.
• The document is produced by a BNPP group company and is for the use of intended recipients only.