(Bloomberg) Investors are betting a trade that reaped returns of more than 20 percent last year for borrowing dollars to buy Brazil’s real, Russia’s ruble and South Africa’s rand has further to run — only they’re using the battered British pound to fund long positions in emerging-market currencies. Citigroup Inc. on Monday named shorting the pound against the Russian ruble its top trade of the week. The so-called carry trade, in which investors borrow in countries with low rates to invest in higher-yielding assets, lost some of its appeal late last year as rising U.S. borrowing costs bolstered the greenback and Donald Trump’s election damped appetite for risk. Now the pound’s volatility, sparked by the U.K.’s move to pull out of the single European market, is making developing markets look like a relatively safe bet.
(Bloomberg) With economists questioning U.K. Prime Minister Theresa May’s Brexit plan outlined in a speech yesterday, major banks are starting to quantify the effects on their London business. HSBC Holdings Plc Chief Executive Officer Stuart Gulliver said that operations generating about 20 percent of revenue may have to move to Paris, while Andrea Orcel, UBS Investment Bank president, said the bank will have to move employees from London following the U.K.’s exit from the EU. In other European bank news, Deutsche Bank Chief Executive Officer John Cryan apologized unreservedly as the bank agreed to pay $7.2 billion in a final settlement with the U.S. Justice Department over its handling of mortgagebacked securities before 2008.
(Bloomberg) The Davos play is missing its prince, as conversations there are dominated by the absent President-elect Donald Trump. While attendees have expressed nervousness about Trump’s populist policies, many are excited about fresh opportunities for business under his administration. The lone attendee from his incoming administration, hedge fund manager Anthony Scaramucci, described the PEOTUS as an “unbelievable strategist.”
(Bloomberg) — Treasury yields and the dollar have room to rise further with or without Donald Trump, according to the world’s biggest fund manager (BlackRock). An increase in global inflation expectations that began months before November’s U.S. election will continue, and may push U.S. 10-year note yields up to 3 percent by the end of December, according to BlackRock Japan Co. The greenback may strengthen to 120 yen, said the company, whose parent BlackRock Inc. oversees $5 trillion.