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CURRENCY RISK ASSESSMENTS

In addition to our regular monthly surveys for our panellists central projections for over 90 currencies we also ask our panellists for their estimates of the likelihood of alternative, perhaps less likely, outcomes in certain major currencies over the next twelve months in Foreign Exchange Consensus Forecasts (in July and December) for the currencies listed below.

To download a sample issue of Foreign Exchange Consensus Forecasts please click on the button below or continue reading to learn more about this special survey.

G7 Asia Pacific Eastern Europe Latin America Africa
Euro Australian Dollar Czech Koruna Argentinian Peso South African Rand
Japanese Yen Chinese renminbi Hungarian Forint Brazilian Real  
UK Pound Hong Kong dollar Israeli Shekel Chilean Peso  
Canadian Dollar Indian Rupee Polish Zloty Mexican Peso  
  Indonesian Rupiah Russian rouble Peruvian Sol  
  Malaysian Ringgit Turkish lira Venezuelan Bolivar  
  New Zealand dollar      
  Philippine Peso      
  Singapore dollar      
  South Korean Won      
  Taiwanese dollar      
  Thai baht      

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The table and text commentary below represent a portion of this special survey taken from our December 2016 issue of Foreign Exchange Consensus Forecasts

Consensus Probability (%) of Currency Depreciation or Appreciation
Survey Dated December 5, 2016 Currency Link Depreciation vs US$ +/-5% Appreciation vs US$
-20% or more -6% to -19% +6% to +19% +20% or more
 Japanese yen Floating 7.5 21.7 44.6 22.5 3.7
 UK Pound Floating 6.2 15.8 48.0 22.5 7.5
 South African rand Floating 8.8 21.3 36.3 23.6 10.0
 Argentinian Peso Managed Float 12.5 67.5 15.0 5.0 0.0
 Chinese renminbi Managed Float 5.0 20.0 60.0 10.0 5.0
 Czech Koruna1 Managed Float 1.0 7.0 84.0 7.0 1.0

1 Probabilities are for appreciation/depreciation against the euro.

Consensus forecasts are averages of individual panellists’ predictions of how a currency is most likely to move over a given time horizon, but most forecasters would also attach some probability to various alternative outcomes or scenarios. Our special survey of ‘Currency Risk Assessments’ is an attempt to quantify these uncertainties, using our panellists’ estimates to produce a number of consensus probability or risk distributions. This approach is especially useful in the case of pegged or heavily managed currencies, like the Czech koruna and the Venezuela bolivar. Alas, our annual assessment of this topic has coincided with intense uncertainty regarding the political and economic outlook for Latin America. The value of the Mexican peso has plummeted, due to concerns about possible barriers to trade under a new US administration. We do not, therefore, show consensus probability distributions in the table above for most currencies in this region (as well as a couple in Eastern Europe) where we did not receive sufficient survey responses to form consensus probability distributions. The likely direction of these currencies is not obvious, despite their recent sharp slide, as the room for further decline, or perhaps recovery, hinges upon an evolving mix of events in an environment of fast moving capital flows and expectations about tighter US$ liquidity.

The outlook for the renminbi is uncertain, due to unwanted capital outflows and the perception that the strength in Chinese exports to the US is caused by unfair weakness in its currency. Most panellists expect the renminbi to trade within a +/-5.0% range against the US dollar over the next twelve months, with probabilities of 25.0% and 15.0% attached to moves of greater or less than this.

A portion of text taken from Foreign Exchange Consensus Forecasts, December 5, 2016.