JPMorgan bank recommends the Czech koruna and the Russian ruble as currencies worth having, writing that keeping these currencies in an above-average volume compared to currencies of other countries referred to as the young market economies of the region.
Inflation and the associated growth in bond yields in developed countries will lead to a decline in the exchange rates of those countries that belong to the category of young market economies in Europe, the Middle East, and Africa, analysts at the US JPMorgan investment bank predicted. However, according to them, there will be significant differences between individual countries.
“The global inflation narrative is shifting from ‘temporary’ to ‘permanent,’ raising the prospect of a sharp adjustment in core yields,” said Saad Siddiqui, an analyst at the bank, adding that currencies of developing countries are unlikely to escape unscathed in this scenario.
JPMorgan, therefore, changes its recommendations for these currencies and advises clients to reduce their volume in the portfolio as a whole to below average compared to other currencies. So far, the advice has been to maintain a roughly equal percentage of them.
However, the bank drew attention to the differences across the region. JPMorgan assessed the prospects of South Africa pessimistically before the beginning of next year, noting growing risks. The Turkish lira is also vulnerable, and the bank urges caution.
However, JPMorgan’s analysts continue to prefer the Czech koruna and the Russian ruble. In both cases, they recommend clients to keep these currencies in an above-average volume compared to other currencies of countries referred to as the young market economies of the monitored region.