Currency Outlook: in The Dollar, We Trust

Currencies
Global
November 2021
By: Global FX Research www.research.hsbc.com
Currency Outlook
In the Dollar, we trust
The USD should continue to
strengthen gradually in 2022 amid
ongoing slower global growth, the
Fed’s pending lift-off, and policy
divergence
In 2022, we still have trust in the

USD and expect it to remain resilient
versus most major currencies
We outline the rationale behind our

new forecasts. The AUD stands out
alongside the USD, but we see little
reason to favour rate hike laggards
such as the EUR, SEK, CHF, and JPY
in 2022
Also in this report:

2022 Currency Outlooks
2022 Gold and Silver Outlook
Disclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it.
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Currencies ● Global
November 2021
Summary
In the Dollar, we trust (pg 2)
We believe the USD will strengthen gradually in 2022 amid ongoing moderation in global
growth, the Fed’s pending lift-off, and widening policy divergence. The Fed’s gradual path
towards rate hikes will be increasingly influential for the greenback as its short-end yield
advantage widens further versus the EUR and other rate hike laggards. As such, we trust that
USD strength will continue in the year ahead and adjust some forecasts accordingly.
Thematic FX Trade ideas (pg 9)

We present trade ideas for 2022 for select currencies in G10, Asia, CEEMEA and LatAm.
Key Events for the DXY in 2021 (pg 11)
2022 Currency Outlooks (pg 13)

We provide single-page summaries of our 2022 outlook for select currencies in G10, Asia,
CEEMEA and LatAm as well as for gold and silver.
G10 (pg 13 – 21)
Asia (pg 22- 26)
CEEMEA (pg 27 – 30)
LatAm (pg 31 – 34)
Gold & Silver (pg 35 – 36)
The authors would like to acknowledge the significant contribution of Olivia Pote and Mohd
Tariq Azim to the production of this report.
1
November 2021
In the Dollar, we trust

 The USD should continue to strengthen gradually…
 …amid ongoing slower global growth, the pending lift-off by the Fed
and policy divergence
 In 2022, we still have trust in the USD, expecting it to be resilient
versus most major currencies and adjust some forecasts accordingly
As the new year beckons, we believe the USD’s resilience should continue. Before delving
deeper into our outlook for the coming year, we first want to step back and consider our
framework from nearly one year ago. Back then, we argued that USD weakness was cyclical
and that the greenback would eventually rebound as two forces came together:
1) A moderation in global growth
2) The Fed’s gradual shift towards policy normalisation
While the USD’s recovery started earlier than we expected, the direction of travel has been clear
to us and still is. These two forces are likely to remain crucial for the USD outlook in 2022.
To help guide us, we have frequently referred to the striking similarity between the USD’s
behaviour in 2017-2019 and the more recent period starting in March 2020 (Chart 1). There
was a strong, global, synchronised growth cycle in 2017, which coincided with USD weakness.
This growth cycle then lost momentum in 2018 while the Fed steadily raised interest rates. This
combination propelled the USD onto a stronger path. In our view, this period provides a solid
template as to how the USD can perform in the months ahead. It has been well discussed how
global growth is moderating lately and while the Fed has only begun to shrink its balance sheet,
the path towards eventual rate hikes will only matter more as 2022 unfolds (Charts 2 and 3).
The USD may not fully mimic the strength in late 2018 and 2019 but there should be some
clear similarities.
1. USD moves have rhymed with the past – further strength is likely
128 133
126 131
124 129
127
122
125
120
123
118
121
116 119
114 117
112 115
Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
USD NEER in Nov 2016 to Nov 2019 USD NEER more recently (right y-axis and lower x-axis)
Source: Bloomberg, HSBC
2
November 2021
2. The USD has an inverse relationship 3. The bounce in global growth from Q2
with global trade 2020 was consistent with other upturns…
30 Duration of global cy clical upswings (in months)
115 95
25
110
105 20
105
15
100
115 10
95
90 5
125
85 0
80 135
2000 2004 2008 2012 2016 2020
Broad USD nominal (LHS)
Global goods exports / GDP (RHS, inverse, rebased 100 = 1999)
Source: CPB World Trade Monitor, HSBC Note: We determine upcycles using the OECD leading indicator (trough to peak).
Source: OECD, HSBC
Global growth - everything in moderation

We have regularly outlined the connection between the global growth cycle and currency
performance, in particular the USD. It is straightforward but those currencies that are more
sensitive to trade flows and can be riskier in nature should do better when global growth
is accelerating. The USD is at the other end of this spectrum, performing better when
global growth is slowing (Chart 2). We recognise that global growth cycles will differ in scale
but the general pattern for exchange rates is fairly uniform.
Putting this into context, the v-shaped recovery from Q2 2020 was very pronounced but it was
also consistent in terms of duration with the other recent global upswings (Chart 3). USD
weakness made sense against such a backdrop, especially when risk appetite was so
pronounced. Since April 2020, there is a point to be made that the USD’s decline has been
larger than the ‘norm’ while some currencies like the NOK have been unusually strong (Chart
4). We can clearly rationalise some of this resilience given high energy prices.
There are many indicators that highlight how manufacturing activity and the global trade cycle
have lost momentum compared to last year but these do not imply a recession is on the horizon
(Charts 5 and 6). This is important for us when thinking about how much USD strength to
expect. However, counter-cyclical USD strength will likely be exacerbated if short-end US
Treasury yields are rising at the same time (Chart 7).
4. …with major FX behaving like the past, 5. Global growth indicators are still losing
but the USD was weaker than average momentum*
57
25%
1.4
20% 55
15% 53 0.4
10%
51
5% -0.6
0% 49
-1.6
-5% 47
-10% 45 -2.6
Dec-10 Aug-12 Apr-14 Dec-15 Aug-17 Apr-19 Dec-20
Global manuf acturing PMI (lhs)
Average across past cyclical upswings Current cyclical upturn
New o rde rs - invento ries (RHS; US, EZ, TW, SWE; 3m lea d)
We identify 6 upcycles using the OECD leading indicator (trough to peak) since *Note: the new orders-inventories differential is a composite of surveys from US,
2000. We calculate the change in each exchange rate (vs USD) during each upcycle Eurozone, Sweden and Taiwan
and then take a simple average. Source: OECD, HSBC Source: Refinitiv Datastream, Markit PMI, HSBC
3
November 2021
6. Global trade (goods) volumes lost 7. Anti-cyclical currencies, including the

momentum compared to 2020 USD, perform better when growth slows
8% 7.3% 20%
6% 10%
4.4%
4% 2.7% 0%
2.4%
1.8% 1.6% 1.9%
2% 0.7% 0.8% -10%
0.4% 0.4% 0.1%
0% -20%
-0.1%
-1.4%
-2% -1.4% -30%
Jun-20
Jan-21
Jun-21
Jul-20
Jul-21
May-21
Aug-20
Sep-20
Nov-20
Dec-20
Aug-21
Oct-20
Apr-21
Feb-21
Mar-21
m/m change in global trade volume Average across past cyclical downturns 1Q14-1Q16 episode
Source: CPB, HSBC We identified 7 downcycles using the OECD leading indicator (peak to trough since
2000. We calculate the change in each exchange rate (vs USD) during each
downcycle and then take a simple average. We single out 1Q14-1Q16 because 2-
year US Treasury yields unusually rose during that episode. Source: OECD, HSBC
Keeping it in perspective
We have been quick to point out that our forecasts for USD appreciation are modest. If we
believed a sharp slowdown could occur, then we would have a much steeper USD profile.
Nonetheless, an obvious concern is the persistent nature of bottlenecks that continue to

cramp the global growth outlook. This has been well discussed for a number of months but it
is not showing much sign of improving. The global PMI surveys show the rapid increase of input
prices has coincided with longer delays in suppliers’ deliveries (Chart 8). The last episode
occurred in the aftermath of the GFC, but this time round is more challenging and could be
longer-lasting. Supply-side inflationary pressures have been evident in a many places – from
commodities and raw materials, electricity/power, semiconductors, transport and freight, to
name but a few. The longer that this disruption lasts, the longer that global trade will be
constrained. In turn, this would keep the USD on a stronger footing, all things being equal.
What if bottlenecks suddenly subside and, for example, suppliers’ delivery times
improve? If this were to create potential for a global growth rebound, then there could be a
temporary period whereby the USD struggles. However, this would overlook another essential
determinant of the USD, namely the Fed’s policy normalisation. This has steadily mattered for
FX with the broader USD taking direction from higher short-term US Treasury yields, as
the so-called ‘dots’ have signaled quicker rate hikes to come (Charts 9 and 10). The USD
and 2-year yield relationship has broken down lately as given the spillover from the market
expecting other central banks to raise rates quickly (i.e. BoE and RBA). Though if US 2-year
yields remain at an elevated level, then the USD would look too low in comparison.
8. Bottlenecks persist when looking at the 9. The USD has been linked to US 2-year
delay in suppliers’ deliveries yields for most of 2021
Index World: Manufacturing PMI Index 0.5% 1210
80 80
1190
70 70 0.4%
1170
60 60
0.3%
1150
50 50
0.2%
40 40 1130
30 30 0.1% 1110
2010 2012 2014 2016 2018 2020 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21
Input prices US 2Y yields (LHS) BBDXY Index (RHS)
Suppliers' delivery times (below 50 = getting longer)
Source: Markit, HSBC Source: Bloomberg, HSBC
4
November 2021
10. The Fed’s dots will matter for the forward guidance
Number of FOMC participants Federal funds target for the end of 2023 Number of FOMC participants
12 11 12
2023 median projection 2023 median projection 2023 median projection
10 (June 2021) 10
(March 2021) (Sep 2021)
8 8
6
6 5 6
4
4 3 3 3 3 3 3 4
2 2 2
2 1 1 1 1 2
0 0
0.250 0.500 0.750 1.000 1.250 1.500 1.750
Midpoint of target range, %
Projections made in March 2021 Projections made in June 2021 Projections made in September 2021
Source: Federal Reserve, HSBC
Reduced bottlenecks could have mixed implications for the Fed and others’ view on the
direction of monetary policy. It may help lower inflation expectations but coincidentally raise the
capacity for higher activity. Inflation-targeting central banks would feel relieved while others with
a broader mandate such as the Fed may not to the same extent.
Fed up
It is stating the obvious that the outlook for the Fed will clearly be in focus going forward. Some
argue that the Fed’s tapering will not matter much for exchange rates. There are valid points to
this thinking given how clear the Fed guidance has been over the past year. Plus, the
experience in December 2013 is often cited when the Fed first detailed the actual reduction of
its asset purchases. That tapering was very measured, starting with a reduction of USD5bn for
US Treasuries and MBS for USD5bn (to USD40bn and USD35bn, respectively). The USD
hardly moved and liquidity was flush in the months after tapering began (Chart 11).
But if tapering pulls forward market rate hike expectations further, then this would be more
positive for the USD. This was not the case in 2013, which helps to explain the USD’s muted
reaction initially. This time could be different particularly if the Fed tapers faster. We
understand the arguments that the start of tapering may not impact other markets, but
we believe it should still impact the USD positively.
As the Fed’s balance sheet growth winds down in the coming months, this will only emphasise
the longer-term force of policy divergence. The relative size of central bank balance sheets has
been a factor in determining FX performance since March 2020, as we have regularly shown,
(Chart 12). Yet, the USD is an outlier, underperforming relative to the wider relationship. This
could change once the tapering starts.
11. The USD was stable after the tapering 12. FX performance and balance sheet
details were announced in December 2013 expansion; the USD is an outlier
0.8 92 FX performance since 18 March 2020 (%, y-axis) versus
increase in CB B/S since 18 March 2020 (% GDP, x-axis)
90 40
35 NOK
88 AUD
0.6 30
86 25 NZD
20
84 15
SEK GBP
0.4 CAD
82 10
5 R² = 0.3893 CHF EUR
80 0
0.2 78 -5 USD JPY
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 -10
-15
US Treasury yields (2yr, LHS) DXY (RHS) 0 5 10 15 20 25 30 35
Source: Bloomberg, HSBC Source: Bloomberg, HSBC
5
November 2021
13. Rate differentials and FX have had a 14. Terminal rate changes have been
volatile relationship somewhat important in recent months
Corr. of 3m change in G10 FX and rate 5y 1m differentials Change in 5y1m fwd (x, ppt) vs FX performance (y, %)
1.00 3%
0.80 2% NZD
0.60 2% CHF CAD AUD
0.40 1% SEK
1% USD NOK
0.20
0%
0.00
-1% R² = 0.365
-0.20 GBP
-1%
-0.40 -2% EUR
-0.60 -2% JPY
-0.80 -3%
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40
For a while, we have believed the USD would transition onto a stronger path as two forces
came together, namely the moderation in global growth and the Fed taking a gradual but
divergent path towards eventual rate hikes. The latter is likely to take on greater importance
and will also lead to continued differentiation among major currencies, in our view.
G-rate expectations
The interplay between exchange rate movements and interest rate differentials has not
always been consistent this year. For instance, we can see how the relationship between FX
performance and 5y1m rate differentials has developed since 2020 (Chart 13). The link has
been quite strong in H2 2021 with only a few outliers in the most recent reading (Chart 14). It is
similar when assessing FX performance versus the implied level of terminal rates (Chart 15).
Nonetheless, we believe this regime should become more stable given central banks are
scaling back their unconventional policies and beginning to raise interest rates, as the economic
scarring from the pandemic fades (Chart 16). In other words, we believe that major exchange
rates will increasingly shift into a sounder FX carry environment.
While we believe the USD should be in a stronger position in the coming months, there
might be other currencies that can hold their own. And this will also help identify relative
opportunities amongst major currencies.
15. Levels of rates also mattered more in 16. Variations across G10 in post-
recent months pandemic economic scarring
5y1m fwd rate (x, ppt) vs FX performance (y, %) 2020 2021 2022
108 108
2.0% AUD
106 GDP level, 2019 = 100 106
1.5% CAD
NZD
CHF 104 104
1.0% SEK
0.5%
NOK 102 102
USD 100 100
0.0%
-0.5% 98 98
R² = 0.5575 96 96
-1.0% EUR GBP
-1.5% 94 94
-2.0% JPY 92 92
-2.5% 90 90
0.00 0.50 1.00 1.50 2.00 2.50 3.00 JN UK EZ SZ AU CA NZ US NO SW
Source: Bloomberg, HSBC Source: HSBC
6
November 2021
In our view, the focus should be squarely on those currencies offering both positive carry and
the added benefit that their central banks could normalise monetary policy faster and by a larger
magnitude, with less already priced in to the front of the rate curve versus the terminal rate.
When looking from this angle, the USD stands out, as mentioned, but so does the AUD
(Chart 17, top right quadrant). The RBA maintained its dovish forward guidance for most of
2021, but the recent upward pressure on front-end rates – and stronger local data pulse – led
the central bank to abandon its Yield Curve Control policy sooner than previously expected.
Based on market pricing there is room for further hawkish surprises which would be supportive
for the AUD, relatively speaking.
The NOK, CAD and NZD offer relatively high forward-looking yields but much of the
expected tightening could already be discounted (Chart 17). Indeed, the 5y1m-1y1m part of
the curve that we consider below is either very flat or even inverted. This suggests that it will be
harder for these currencies to see a more aggressive tightening than is priced in, unless the
market’s assessment of the longer-term rate reprices much higher.
17. Yield levels and potential to speed up rate hikes should support currency
performance
5y1m yield (y-axis, %) and 5y1m-1y1m curve slope (x-axis, bp)
3.0 High yields,
High yields,
flatter curves steeper curves
2.5 NZD
AUD
2.0 CAD
NOK
1.5 USD
1.0 GBP SEK
0.5
Low yields, Low yields,
flatter curves CHF steeper curves
0.0 JPY EUR
-50 -25 0 25 50 75 100 125 150
X-axis and Y-axis aligned with the average yield level and curve steepness across the currencies included at the time of publication
Source: HSBC, Bloomberg
We see little reason to favour the rate hike laggards such as the EUR, SEK, CHF and JPY.
The EUR may be particularly vulnerable as we believe the tightening that is priced in for late
2022 is excessive. The ECB may still be expanding its balance sheet in the latter part of 2022,
rather than thinking about raising rates
Conclusion
We have been focused on the USD transitioning from a weaker to stronger state this year. Our
central argument has rested on two factors coming together to support the USD: the moderation
in global growth and the Fed embarking on a gradual path towards eventual rate hikes. The
latter will be increasingly influential for the USD as its short-end yield advantage widens further
versus the EUR and some other currencies. So, we trust that USD strength will continue. As
always there are risks to this view, including the potential for global growth to re-accelerate
which coincides with USD weakness. Nevertheless, we think this would be a temporary
phenomenon.
Our belief that the USD can strengthen further will also be a headwind for EM currencies. We
have highlighted our views about this previously but it may not be insurmountable. Some
currencies are supported by higher yields and solid core balances that could steady them,
including the RUB, IDR, and INR (See ‘Core strength’, EM FX Roadmap, 29 October 2021). For
7
November 2021
EM currencies to perform better, this may require the market believing the expected tightening
cycle could be increasingly discounted (i.e. flatter curves).
We lay out our main forecasts in Table 1. In the remainder of this report we provide more
detailed outlooks for the principal currencies under our coverage.
Table 1. HSBC FX forecasts

Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022
G10
EUR-USD New 1.15 1.14 1.13 1.12 1.10
Old 1.15 1.14 1.13 1.13 1.13
GBP-USD New 1.34 1.33 1.32 1.31 1.30
Old 1.34 1.34 1.34 1.34 1.34
USD-JPY New 113 114 114 115 115
Old 110 111 112 112 112
USD-CAD New 1.25 1.26 1.27 1.27 1.28
Old 1.27 1.28 1.29 1.29 1.29
AUD-USD New 0.74 0.74 0.74 0.74 0.74
Old 0.72 0.71 0.70 0.70 0.70
NZD-USD New 0.72 0.71 0.70 0.69 0.68
Old 0.69 0.68 0.67 0.67 0.67
EUR-CHF New 1.05 1.05 1.05 1.05 1.05
Old 1.07 1.06 1.05 1.05 1.05
EUR-SEK New 10.00 10.20 10.40 10.60 10.80
Old 10.50 10.70 10.80 10.80 10.80
EUR-NOK Unchanged 9.80 9.90 10.00 10.10 10.20
Asia
USD-RMB Unchanged 6.40 6.40 6.45 6.50 6.55
USD-IDR New 14000 14000 14000 14100 14200
Old 14700 14600 14500 14500 14500
USD-INR Unchanged 75.5 74.5 74.00 73.50 73.00
USD-KRW New 1180 1175 1170 1165 1160
Old 1170 1160 1150 1140 1140
USD-MYR New 4.15 4.12 4.10 4.08 4.05
Old 4.20 4.18 4.15 4.12 4.10
USD-SGD New 1.35 1.34 1.34 1.33 1.33
Old 1.36 1.35 1.34 1.33 1.33
USD-TWD New 28.0 28.0 28.2 28.4 28.5
Old 28.5 29.0 29.0 29.0 29.0
USD-THB New 32.8 32.6 32.3 32.0 31.8
Old 33.0 32.5 32.0 31.8 31.5
USD-PHP New 50.0 50.0 50.5 51.0 52.0
Old 51.0 50.5 50.0 50.0 50.0
USD-VND New 22,525 22,500 22,600 22,700 22,800
Old 22,525 22,650 22,750 22,850 23,000
LatAm
USD-BRL Unchanged 5.60 5.70 5.80 5.80 5.70
USD-CLP New 800 810 820 830 840
Old 730 740 750 750 750
USD-COP New 3850 3875 3900 3900 3900
Old 3525 3550 3550 3550 3550
USD-MXN Unchanged 20.00 20.25 20.50 20.75 21.00
USD-PEN New 4.00 4.00 3.95 3.90 3.90
Old 4.20 4.15 4.10 4.05 4.00
USD-UYU New 43.50 43.50 43.00 43.00 42.75
Old 43.00 42.75 42.75 42.75 42.75
CEEMEA
EUR-PLN New 4.50 4.40 4.35 4.30 4.30
Old 4.40 4.30 4.20 4.20 4.20
USD-RUB Unchanged 70.00 68.00 65.00 65.00 65.00
USD-TRY Unchanged 9.80 10.00 10.50 10.60 10.70
USD-ZAR New 15.00 15.30 15.50 15.70 15.90
Old 14.50 14.80 15.00 15.00 15.00
Source: HSBC
8
November 2021
Thematic FX trade ideas
G10
Sell EUR-USD
We believe the EUR will continue to underperform especially versus the USD in 2022. The ECB
is a long way from normalising monetary policy in our view, despite forward rates suggesting a
hike could happen next year. This is in stark contrast to a Fed which has already started to
tighten policy amidst stronger core inflation and wage pressures than can be seen in Europe. In
a world where carry and rate differentials will matter more, the EUR should underperform from a
levels perspective as it will be a key choice as a funding currency, with potential further
downward impetus coming if the ECB does disappoint the market’s hiking expectations.
Sell GBP-USD
We retain a bearish view on GBP in 2022. Although we expect the Bank of England to tighten
policy in the months ahead, the extent of that cycle is likely to be curtailed versus other G10
central banks – especially the Fed. UK output remains below pre-pandemic levels, unlike many
other G10 economies, and structurally weak growth is also highlighted by the decline in the
UK’s neutral interest rate. This is further manifested in the UK’s yield curve being inverted
beyond one year. This will make it hard for the BoE to surprise to the hawkish side relative to
what the market is pricing in the short term. The Fed’s assessment of its long-term interest rate
remains much higher and this provides potential for a longer hiking cycle. The UK’s external
balances are also likely to deteriorate as the economy normalises.
Buy NOK-SEK
While both Scandinavian currencies are similarly exposed to the slowing global trade cycle and
somewhat softer European growth outlook, we believe the NOK should have room to
outperform the SEK based on clear monetary policy divergence. The Norges Bank has already
started hiking rates and has a clear path to go further. This is despite relatively soft inflation, as
the central bank focuses on its financial stability mandate as a reason to tighten policy. The
Riksbank remains fervently dovish, and we project no hikes until 2024. The market has started
to price tightening in 2022 which sets the stage for a dovish disappointment, especially with
core inflation still so low in Sweden. We do not think the Riksbank is likely to repeat its ill-fated
and short-lived tightening cycle of 2011 in the months ahead. Low rates and the room for rate
hike disappointment make SEK stand out as a likely underperformer in our view.
Asia
Sell CNH-INR
We believe the CNH is modestly overvalued, particularly against Asian currencies in the CFETS
basket. To get positive carry, we prefer to sell the CNH against a higher-yielding currency like
the INR. There are also good reasons to like the INR – persistent FDI inflows, a strong IPO
pipeline and a potential for Indian government bonds to be included in global indices. Monetary
policy settings in China and India are also diverging – the People’s Bank of China may still lean
towards targeted easing as growth momentum has yet to bottom out, while the Reserve Bank of
India is draining excess liquidity and is likely to start raising reverse repo rates soon.
9
November 2021
Buy a bespoke SGD basket

Amid global inflation concerns, we believe the SGD will outperform, as the Monetary Authority of
Singapore typically leans hawkish and it directly uses the exchange rate to manage inflation
risks. However, since we estimate that the official SGD NEER index is just 0.8% away from the
upper limit of the band, and the slope is only 0.5% (appreciation per annum) currently, we prefer
to buy a bespoke SGD basket to achieve higher returns. We suggest buying the SGD against
AUD, EUR, GBP, RMB and TWD on an equally weighted basis. These are currencies that the
SGD had underperformed – by 5% on average – after the pandemic broke out in early 2020.
This bespoke basket also reduces the negative carry of buying SGD NEER to roughly zero.
CEEMEA
Sell USD-RUB
We believe that the RUB will record further gains in 2022. Inflation is a macro challenge but the
central bank’s policy reaction remains appropriate. The CBR is very clear about its objective to
bring the real policy rate back to neutral territory between 1-2% as quickly as possible. Such a
policy objective will be achieved in 2022 and support the currency, in our view. Meanwhile, the
current account surplus is set to remain sizeable amid normalising oil production and high
prices. With these dynamics, we believe the RUB’s valuation is set to normalise completely with
USD-RUB falling to 65.0.
Sell EUR-PLN
A positive output gap and monetary policy normalisation are conducive to PLN strength, in our
view. For us, recent hikes are just the beginning of a rate hike cycle with the question around
the terminal rate taking centre stage. The NBP may have to deliver aggressive hikes and
welcome a stronger FX to fight an inflation persistently above 5.0% in 2022. A significant move
lower of EUR-PLN is all the more likely since Poland’s external position is likely to remain
comfortable and there is no FX valuation misalignment.
LatAm
Buy MXN-CLP
Given our view of a broadly stronger USD against LatAm currencies, our preferred trade in the
region is a relative value trade that takes advantage of higher yields in MXN (6.8% implied 12m
forward yields) relative to CLP (4.9% implied 12m yields), as well as reflect the likelihood of spot
outperformance by the MXN versus the CLP from current levels. We have some concerns over
political risks in Chile with general elections ahead, and with the Constitutional Assembly writing
a new constitution during H1 2022, while we think the MXN may outperform the region on the
back of lower fiscal and political risks.
10
November 2021
Key events for the DXY year-to-date

Jan 2021 = 100 Jan 2021 = 100
106 106
13 Oct: Treasury 4 Nov: USD climbs
14 Jan: Fed Chair amid falling US
Powell says "too 4-5 Mar: Fed's Powell yields drop as US
22 Sep: FOMC holds rates, Powell September CPI tops yields after BoE
soon" to consider describes yield move
flags November taper; Shift in forecasts at 5.4% YoY surprises by
exit of Fed support as "notable"; February
17 Mar: FOMC held rates Fed median dot shows first rate holding rates
Paryolls beat estimates 15 April: US 10y yields
105 for 200k hike in 2022 from 2023 105
tumble 12bp despite
massive March Retail 19 Aug: July FOMC
minutes flag 2021 taper
23 Mar: USD gains as Sales beat
concerns over renewed
lockdown in Europe
104 spread 13 Aug: US Consumer 104
Sentiment plunges to
lowest since 2011
17 Feb: US Retail Sales 2 July: June unemployment 28 Oct: US 3Q GDP
up 5.3% MoM in Jan, rate dissapoints at 5.9% vs growth miss at 2%
crushing expectations estimates for 5.6% despite (QoQ ann.) for
103 for 1.1% increase strongest payrolls gain in slowest pace since 103
ten months start of recovery
9 Feb: USD relinquishes 18 June: Fed Bullard sees

gains following weaker than rate hikes starting late 2022
102 expected Jan payrolls 102
29 Oct: US 2y yields
12 May: US CPI climb to 0.50% from
accelarates 0.8% MoM 0.28% in October
exceeding expectations
11 Mar: Biden signs for 0.2%
USD1.9trn pandemic relief bill 6 Aug: USD rallies amid surge
101 13 July: US core CPI 101
in yields after largest payrolls
accelerates 0.9% MoM in gain YTD in July fuels taper
June, topping estimates
27 Feb: US 10y yields spike expectations
higher exceeding 1.6% for
first time in over a year 3 Sep: Delta virus drives shortfall in
August Payrolls with 235k print vs
100 expectations for 735k 100
11 Jan: Fed 19 Feb: Risk tone improves on 29 July: US 2Q GDP misses
Regional President hopes of easing geopolitical 16 June: FOMC median expectations for 8.5% QoQ
Bostic open to late tensions as President Biden set 7 May: April Nonfarm dot shows two 25bp rate ann. with 6.5% increase
2021 bond taper Payrolls miss estimates for hikes by end 2023
to unveil new US foreign policy
1m gain with 266k print
99 99
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21
11
November 2021
2021 Currency Views

G10 (pg 13-21)
EUR (pg 13)
GBP (pg 14)
JPY (pg 15)
AUD (pg 16)
NZD (pg 17)
CAD (pg 18)
NOK (pg 19)
SEK (pg 20)
CHF (pg 21)
Asia (pg 22-26)

RMB (pg 22)
INR (pg 23)
IDR (pg 24)
KRW (pg 25)
SGD (pg 26)
CEEMEA (pg 27-30)

PLN (pg 27)
RUB (pg 28)
TRY (pg 29)
ZAR (pg 30)
LatAm (pg 31-34)

BRL (pg 31)
MXN (pg 32)
CLP (pg 33)
COP (pg 34)
Gold & Silver (pg 35-36)
12
November 2021
EUR: A long way to go
EUR-USD forecasts The EUR is likely to underperform in 2022, in our view. As the world moves into monetary policy
Q4 2021: 1.15 normalisation mode, the ECB is likely to be towards the back of the queue in terms of delivering
Q1 2022: 1.14 some form of tightening. The market has priced a rate lift-off in 2022, but it is possible the
Q2 2022: 1.13 central bank may still be conducting asset purchases late next year, rather than being close to
Q3 2022: 1.12
hiking policy rates for the first time in a decade. The EUR is therefore likely to face pressure as
Q4 2022: 1.10
a low-yielding funding currency in terms of the levels of rates, but may also see greater
downside if the market is disappointed that the expected tightening is not delivered.
Cyclical challenges…
In recent economic cycles the EUR has struggled for buoyancy unless there was a clear
synchronised global growth story, with the eurozone at the heart of it in 2017. There is little sign
of this as we peer into 2022. If anything, local growth will settle down to a slower pace than
many other G10 economies. Meanwhile, domestic inflation pressures do not look as onerous
with core inflation subdued relative to others in G10 and few signs of the wage gains that are
starting to filter through elsewhere. This suggests the ECB will be hard pressed to move away
from its current policy settings next year, despite the market pricing a rate hike in late 2022.
…structural frailties…
The central bank may also find it harder to curb its asset purchases due to the specific structural
challenges in the region. While the ECB’s various QE programmes are related to growth and
inflation, policy makers must also manage excessive tightening in financial conditions caused by
widening periphery yield spreads. This is likely to keep the central bank on the defensive and
contribute to ongoing portfolio outflows which have weighed on the EUR in recent years.
…and political risks

The market may also show some caution ahead of the French Presidential elections in April
2022. In 2017, there were significant risk of a clear euro-sceptic outcome. That is less acute this
time around, and it is a risk factor that may see market participants steer clear of the EUR in Q1.
1. Core inflation below target and peers 2. Hard to stem financial outflows
EZ Core CPI US Core CPI Portfolio flow 3m avg Portfolio flow 12m avg
EUR 5y5y inf. USD 5y5y inf.
10% 10%
5 5
5% 5%
4 4
0% 0%
3 3
-5% -5%
2 2
-10% -10%
% GDP, both ax es
1 1 -15% -15%
0 0 -20% -20%
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-11 Jan-14 Jan-17 Jan-20
13
November 2021
GBP: Over-promise, under-deliver
GBP-USD forecasts: We see further downside for GBP in 2022 and expect GBP-USD to move to 1.30 by year-end.
Q4 2021: 1.34 After showing promise in early 2021, ultimately sterling came under notable pressure in H2. This
Q1 2022: 1.33 disappointment was most notable in the very acute and specific negative reaction to the Bank of
Q2 2022: 1.32
England’s decision to keep rates unchanged on 4 November, contrary to the hike priced into the
Q3 2022: 1.31
market. Further rates disappointment may be coming, based on the inversion of the yield curve.
Q4 2022: 1.30
Meanwhile, external balances, which were a positive in the last year or so, are likely to become
EUR-GBP forecasts: less supportive for the currency in 2022.
Q4 2021: 0.86
Q1 2022: 0.86 Hikes priced – then cuts?
Q2 2022: 0.86 As we explained in the earlier report, interest rates are likely to have a bigger impact on G10 FX
Q3 2022: 0.85 in 2022, both in terms of changes and levels. GBP may struggle on both fronts. Although a
Q4 2022: 0.85 relatively high number of hikes are priced into the next year, this is still below the “high yielders”
in G10 like the AUD, NOK, NZD and USD. So GBP does not stand out as a carry currency.
What worries us more for GBP is the inversion of the rates curve amid persistently low
expectations of the UK’s “terminal” interest rate, which suggests the market is actually starting
to price rate cuts occurring in 2023. If this pricing stays consistent, and we believe it should do
given the UK’s weak medium term growth outlook, it will be very hard for the front end to price in
more hikes, which makes GBP vulnerable to a shift towards potentially faster tightening cycles
in other G10 currencies, especially the USD.
Deficit downfall
If lower terminal rates are part of the “new normal” for GBP, we believe that the external picture
is likely to return to the “old normal” for the currency. This is also a point of potential weakness.
In 2020-2021, the current account deficit narrowed dramatically due to weak import growth and
a strong improvement in the services balances due to the drying up of international travel. The
former is already starting to normalise, with the goods deficit widening as export growth slows
but import growth remains resilient. As travel restrictions are removed, it is also likely the
services component reverses a good portion of its recent improvement. While current account
deficits are rarely the most dynamic drivers for G10 FX, GBP’s will face a big challenge in
funding a widening external shortfall when yields do not offer much of a buffer.
1. Yield curve inversion could hurt GBP 2. C/A improvement unlikely to last
Goods Services
USD 3y1m-1y1m GBP 3y1m-1y1m Pri. Inc. Sec. Inc.
150 150 Current account % GDP, 4Q rolling sum
8% 8%
125 125
100 100 4% 4%
75 75
0% 0%
50 50
-4% -4%
25 25
0 0 -8% -8%
-25 -25 -12% -12%

Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Dec-12 Dec-14 Dec-16 Dec-18 Dec-20
14
November 2021
JPY: Opposing forces – delayed
USD-JPY forecasts We raise our forecasts of USD-JPY, given its sharp increase recently, but retain a view that there will
Q4 2021: 113 be opposing forces supporting the JPY from time to time. We believe USD-JPY is likely to trade
Q1 2022: 114 within a range in 2022, after rising in a one-way fashion in 2021. We now see USD-JPY at
Q2 2022: 114
around 113 in 4Q21 (revised from 110) and around 115 in 4Q22 (from 112).
Q3 2022: 115
Q4 2022: 115 In hindsight, it was premature for us to expect global risk appetite to become more unstable at this
juncture. Concerns about slowing global demand momentum and the Fed’s policy
normalisation are more likely to materialise later in 2022. After all, the OECD leading indicator for
the global business cycle is still hovering at its peak and has not rolled over, while the Federal
Reserve’s tapering has only just started.
Fundamentally, there is no good reason to suspect that the JPY’s “anti-cyclical” and “safe haven”
characteristics have changed. Japan’s net foreign asset position remains the largest globally. In the
various risk aversion episodes since the pandemic started, the JPY unusually weakened slightly
against the USD on average, but it consistently outperformed other currencies, including the high-
beta AUD and other reserve currencies like the EUR and CHF.
Apart from shifts in risk sentiment, there could be other triggers for a reversal in USD-JPY, although it
is hard to pinpoint exactly what now. Interestingly, recent rolling correlations of changes in the JPY
with changes in some commonly identified drivers of the currency – 2-year US yields, 10-year US
yields, the shape of the US yield curve, US breakeven rates, and oil prices – are still generally of the
right signs, but the strength of all the relationships has weakened.
Positioning and valuation metrics suggest that the JPY can rebound, upon a trigger. Short
JPY positioning by the speculative community has reached levels that can be considered stretched,
the JPY REER is materially undervalued, and the year-to-date depreciation in the JPY looks
excessive in scatter plots of G10 FX performance vis-à-vis rate hike expectations and carry.
Indeed, we believe the underperformance of the zero-yielding JPY compared to the negative-
yielding EUR and CHF seems particularly unwarranted. We acknowledge that Japan’s inflation is
the lowest by far in G10. But we think the market may be under-appreciating the recent stability in the
BoJ’s balance sheet while overlooking the likelihood of the ECB continuing QE even in 2022. We
also note that there have been net portfolio inflows to Japan year-to-date, while the eurozone is
seeing large portfolio outflows. Japan’s government pension fund has been selling foreign equities
(rebalancing) and buying only small amounts of foreign bonds in 1Q-3Q21, now that its portfolio
allocations are in line with medium-term targets. Meanwhile, Japanese life insurance companies, in
aggregate, have been keeping the share of foreign securities in their total assets surprisingly stable.
1. JPY correlations are breaking down 2. Unwarranted JPY weakness versus EUR
60% Correlation w ith daily changes in JPY (vs USD) 4%
40% R² = 0.4341
20% 2% R² = 0.4407
0% 0% R² = 0.471
YTD chg v s USD
-20%
-40% -2%
CHF
-60% -4%
-80%
-6% EUR YTD chg in 1Y1m rate
Current 1Y1M rate
-8%
JPY Current 5Y1M rate
-10%
5-Nov 30 days ago 60 days ago -60 0 60 120 180 240
Interest rates, or changes in rates, bp
15
November 2021
AUD: Balanced
It has been a mixed year for the AUD, spending the first half mostly in a 0.76-0.80 range against
AUD-USD forecasts
the USD before weakening in Q3 to spend the subsequent period between 0.72-0.76. We
Q4 2021: 0.74
Q1 2022: 0.74 believe the AUD is likely to spend most of 2022 in this latter range as it faces a mixed set of
Q2 2022: 0.74 drivers that, while allowing it to outperform portions of G10 FX, could make an outright uptrend
Q3 2022: 0.74 against a robust USD difficult to deliver.
Q4 2022: 0.74
The “four C’s” drivers of the AUD (Commodities, Carry, China and COVID-19) all have a part to
play in the 2022 outlook. While they are inter-related, it is likely that the most potent FX
consideration will be the outlook for carry. Currently there is marked gap between the dovish
guidance being offered by the RBA, the first rate hike pencilled in for 2024 and a 2022 hike
dismissed as a possibility, and what is priced into the market. The market mood is more fluid, of
course, but even after the dovish recalibration following the November RBA meeting, there is
still 80bp of tightening priced in over the coming year, and 160bp in the year after that.
Unsurprisingly, AUD fortunes in 2022 will likely hinge mostly on how this gap is closed. The more
the RBA is inclined to shift its guidance (it has already opened the door to the risk case of a 2023
hike), then the more support the AUD can enjoy from these elevated rate expectations. AUD bears
might argue a lot of hawkishness is already in the price. But if the market can cling onto some of
those rate hikes, then the level of AUD yields would remain helpful even if they were out of sync
with RBA rhetoric for a time. Alternatively, if the data (notably on wages) supports the RBA’s patient
perspective, then the AUD would be vulnerable. Our forecast of only a small AUD decline suggests
the yield levels should provide some buffer to the RBA doves in 2022.
The other three C’s will remain a relevant part of the AUD story also. The recent modest decline
in Australia’s terms of trade means the currency looks a little less undervalued on this metric.
Still, the marked deceleration in global activity that has hampered the AUD in H2 21 should be
less of an issue in 2022 as growth stabilises. In addition, we expect China’s economy to see
some stabilisation in Q1 22 on the back of policy stimulus. Ongoing trade tensions with China
should continue to offer an off-setting headwind. Finally, Australia’s re-opening from COVID-19
lockdowns offers economic upside potential, not least for services exports as the border
reopens. However, our economists expect the bounce to be less marked than in the past as
Australia learns to live with COVID-19.
1. Australia commodity prices topping out 2. AUD well placed on rates front
148 0.84 3y1m yield (y, %) and 3y1m-1y1m curve slope (x, bp)
138 0.80 3.0
High yields,
128 0.76 2.5 NZD steeper curves
High yields,
118
0.72 2.0 flatter curves AUD
108 NOK CAD
0.68 1.5
98 USD
88 0.64 1.0 GBP
0.60 SEK
78 0.5 Low yields,
flatter curves CHF Low yields,
68 0.56
Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 Nov-21 0.0 JPY steeper curves
RBA's commodity price index (lhs) EUR
-0.5
AUD-USD (rhs) -50 -25 0 25 50 75 100 125
16
November 2021
NZD: Flightless kiwi
NZD-USD forecasts For a year in which the central bank was at the forefront of hawkish guidance and then rate
Q4 2021: 0.72 hikes, the fact that the NZD was in the middle of the pack of G10 currency performance may
Q1 2022: 0.71 seem a little surprising. But 2021 has seen the NZD digest varied inputs with the upside of
Q2 2022: 0.70 hawkish monetary policy at times offset by local COVID-19 lockdowns or the global growth
Q3 2022: 0.69
deceleration. 2022 is likely to offer a similar cornucopia of drivers, but perhaps with the opposite
Q4 2022: 0.68
implications of those witnessed in 2021, with monetary policy set to be less supportive but
global growth and local COVID-19 considerations less of a headwind. On balance, we continue
to expect the NZD to weaken modestly against a generally robust USD.
First we must concede that there are some reasons to be upbeat on the currency. New
Zealand’s economy has proven remarkably resilient to the recent lockdown, notably in the
labour market where the unemployment rate dropped to its previous record low level of 3.4%
last seen in Q4 07. Inflation continues to track above the RBNZ’s target range, including at the
core level, and is also coming in higher than the central bank forecasted. On the activity front,
our economists expect the strong upswing should continue from Q4 onwards as the economy
continues to reopen. On the global front, decelerating world activity has been a headwind for the
NZD, but with global growth set to stabilise in H2 22 this should be less of an issue.
Why then our caution on the currency? Principally it is because there is no great dichotomy
between what the market believes and what the RBNZ is signalling. The rate hikes which are
priced in dove-tail with the hawkish rhetoric of the central bank. There will be ebbs and flows
alongside the evolution of the data, but there is not the kind of debate that is evident for
example in the eurozone or Australia. In addition, while the market is priced for a sequence of
rate hikes over the coming year, it looks for nothing thereafter. Indeed, if we look at rate
expectations for the end of 2024 compared to the end of 2022, New Zealand’s curve is more
inverted than elsewhere in G10. The excitement of rate hikes is set to fade, if it has not done so
already. Finally, while the acceleration COVID-19 vaccination rates should allow the economy to
re-open more fully, there is still uncertainty as to how consumers will adjust to “living with
COVID-19” rather than the zero-COVID policy of the past. As we expect the USD to be broadly
stronger in 2022, some modest NZD weakness from current levels seems likely overall.
1. Hawkish ammunition 2. Rates help, to a point

% % % %
7.0 7.0 3.00 1.25
6.0 6.5
2.50 1.00
5.0 6.0
5.5 2.00 0.75
4.0
5.0 1.50 0.50
3.0
4.5
2.0 1.00 0.25
4.0
1.0 3.5 0.50 0.00
0.0 3.0 0.00 -0.25
Jan-00 Jan-04 Jan-08 Jan-12 Jan-16 Jan-20 Jan-21 Apr-21 Jul-21 Oct-21
NZ CPI YoY (lhs) NZ Unemployment Rate (rhs) NZD 1y1m (lhs) NZD 3y1m-1y1m spread (rhs)
17
November 2021
CAD: Challenges ahead
The CAD has spent much of 2021 as the best-performing currency within G10 FX, buoyed by a
USD-CAD forecasts combination of accelerating activity (globally in H1, locally thereafter), rising oil prices, elevated
Q4 2020: 1.25
risk appetite and a marked hawkish shift in Canadian rate expectations. We expect 2022 to be
Q1 2021: 1.26
more challenging for the currency. A lot of hawkishness is priced into the CAD and high debt
Q2 2021: 1.27
Q3 2021: 1.27 levels may curb the ability of the BoC to deliver in full. Oil prices look lofty and, while global
Q4 2021: 1.28 economic momentum should not weaken much, activity is less likely to spur the CAD stronger.
As for many currencies in 2022, the interest rate outlook will be pivotal to CAD fortunes. The
difficulty for the CAD is that it is not clear where the additional upside for the currency will come
from on this front. At the time of writing, the market was priced for six 25bp hikes by the BoC
before the end of 2022. HSBC expects the first hike to come in April 2022, earlier than we
previously expected, but with follow-up hikes only in July 2022, October 2022 and January
2023, it would leave the policy rate short of market expectations.
The additional problem for the CAD is that the economy’s burgeoning debt levels may make a
sequence of rate hikes difficult. Our economists point out that the economy’s total debt was
almost 350% of GDP as of Q2 21. They fear that financial frailties that were evident before the
pandemic may emerge quickly as rates begin to rise. In some respects, this is captured in the
market’s rate profile which sees hikes being delivered quickly but then little thereafter. In fact,
the CAD has some modest inversion in rate expectations between the 1Y and 3Y parts of the
curve, in similar though less pronounced fashion to the NZD. This suggests that as the BoC
begins to raise rates, the market may swiftly begin to ponder when the tightening cycle might
stop. It is not a debate that points to prolonged currency strength.
The CAD’s relationship to growth dynamics has not been straightforward and it may remain a
little complicated. The peaking out in global growth saw the CAD face a challenging Q3 21 but
the emergence of Canada’s economy from lockdown has seen the CAD reverse roughly half of
those Q3 losses against the USD. For 2022, we expect global growth to move mostly sideways
but Canada’s is likely to see quarterly growth momentum fade through 2022 from an expected
strong finish to 2021. As we expect oil prices also to retreat from current levels (and Canada’s
local prices already tracking well below WTI), the currency may see less uplift from this factor
also. We continue to expect USD-CAD to finish 2022 at 1.29.
1. The CAD has outperformed its G10 2. Leverage may limit tightening
peers
4% 4% Corp Household Gov
2% 2% 450
Credit to different sectors,
400 market value, % GDP
0% 0%
350
-2% -2% 300
-4% -4% 250
200
-6% -6%
150
-8% -8%
100
-10% -10% 50
CAD NOK GBP NZD CHF AUD SEK EUR JPY
0
Year-to-date FX performance against USD JPY CAD SEK NOK CHF GBP USD EUR AUD NZD
Note: YTD FX performance as of 10 November 2021 Source: HSBC, RBNZ
18
November 2021
NOK: Running out of fuel
EUR-NOK forecasts: The NOK has been propelled higher recently by increased rate hike expectations, a sharp rise
Q4-20: 9.80 in oil prices, and sizeable FX sales by the Norges Bank. In our view, while these forces should
Q1-21: 9.90 remain important, they will struggle to support further NOK upside in 2022.
Q2-21: 10.00
Q3-21: 10.10 The Norges Bank has delivered on its expected policy tightening and has flagged further hikes.
Q4-21: 10.20 However, as Chart 1 shows, the NOK has outperformed the movement in terminal rate
expectations in recent months, so this strength cannot solely be ascribed to rates repricing. A big
part is due to higher oil prices, and the NOK’s increased sensitivity to them in recent months.
This higher beta to commodity price movements has been caused by Norges Bank FX activity.
An historically large non-oil budget deficit and previously low oil prices have seen the central
bank conduct record foreign currency sales of cEUR150m per day (NOK purchases) over the
last few quarters. These FX transactions have enhanced the positive impact of higher
rates and higher oil prices on the NOK, but they are already starting to decline as the
recent run up in oil prices and the smaller budget deficit for 2022 become more prominent
(Chart 2). Although the Norges Bank will still be selling FX in the year ahead, it should be on a
significantly smaller scale which may struggle to overwhelm global forces that tend to dominate
NOK price action.
This can also be seen on the balance of payments flows, where the rebound in Norway’s
current account in the last two quarters alongside the largest net portfolio inflows since 2005
has created a rare double-positive for NOK. This is unlikely to persist into 2022. Our base case
of sequentially slowing global growth should curb some of the marginal demand for commodities.
This chimes with our commodity analysts’ view that oil prices will stabilise or even revert lower in
2022, which would take away some of the optimism around the NOK.
Given our underlying view of a further moderation in global growth in 2022, alongside the
potentially significant shift in FX policy, we expect modest NOK weakness in 2022.
However, the NOK should outperform the SEK on account of relative monetary policies.
1. NOK has outperformed rate movements 2. Higher oil prices should lead to smaller
recently FX sales by the Norges Bank
NOK 5y1m rate EUR-NOK, rhs, inv Daily FX purchases / sales EURm, LHS
Brent, USD/bbl, RHS
2.30 9.6
200 140
2.20 9.7 FX purchases
150
2.10 9.8 120
100
2.00 9.9
1.90 10.0 50 100
1.80 10.1 0
80
1.70 10.2 -50
1.60 10.3 -100 60
1.50 10.4 -150
1.40 10.5 40
-200
1.30 10.6 FX sales
-250 20
Jan-21 Apr-21 Jul-21 Oct-21 Jan-10 Jan-14 Jan-18 Jan-22
19
November 2021
SEK: Doves dominate

EUR-SEK forecasts:
In our view the SEK should face some pressure to weaken in 2022 due to low rates, the
Q4-20: 10.00 potential for monetary policy disappointment, and the currency’s exposure to slowing global
Q1-21: 10.20 growth momentum. We therefore see EUR-SEK rising to 10.8 during the next twelve months.
Q2-21: 10.40
Q3-21: 10.60 The SEK tends to be one of the most vulnerable currencies to external dynamics, due to its
Q4-21: 10.80 reliance on exports and links to the European growth story in particular. With the backdrop of
slowing sequential growth momentum, especially regarding global trade as outlined in the
feature piece earlier, it is hard to see the SEK gaining much positive energy from outside forces.
Domestically, there is little reason for optimism on the currency either. While Sweden has
racked up a very impressive recovery in terms of growth – output is the highest relative to pre-
pandemic in the G10 – there has been very little pass through to inflation. In particular, core
inflation ex-energy, which is the Riksbank’s main focus, has remained below the 2% target for a
number of years, and is not expected to budge meaningfully higher by the central bank any time
soon (Chart 1). Our economists share this view of persistently soft price pressures.
This weak inflation outlook is likely to keep the Riksbank amongst the most dovish central banks
in the G10. The reticence to follow others towards monetary policy normalisation is also likely to
be in part tied up with the bad memories of a short-lived tightening in 2011.
Certain members of the six-person MPC – notably Henry Ohlsson – may have made some
slightly more hawkish noises about the potential persistence of inflationary pressures following
the Riksbank’s rate decision and Monetary Policy report in late September. However, the
majority, especially Governor Stefan Ingves, remain committed doves in our view, with the latter
highlighting that there is “no obvious long-term upturn” from recent inflation signals (Bloomberg,
19 October). This leaves the rates market at risk of disappointment given a hike is now priced
for Q3 next year, while the Riksbank sees rates held at zero until at least the end of 2023 (Chart
2). If this guidance were to turn much more hawkish, then it would be positive for the SEK but
we believe it is too early to speculate on the central bank changing its long-standing stance.
1 Core inflation is low and Riksbank does 2. Riksbank guidance remains more
not envisage a big rise dovish than the market
CPIF ex. Energy Riksbank forecast Riksbank repo projection SEK swap curve
2.5 2.5 1.0 1.0
2.0 2.0 0.8 0.8
0.6 0.6
1.5 1.5
0.4 0.4
1.0 1.0
0.2 0.2
0.5 0.5
0.0 0.0
0.0 0.0 -0.2 -0.2

Jan-14 Nov-15 Sep-17 Jul-19 May-21 Mar-23 Oct-21 Apr-22 Oct-22 Apr-23 Oct-23 Apr-24
Source: Riksbank, HSBC Source: Bloomberg, HSBC
20
November 2021
CHF: Neutrality
EUR-CHF forecasts: Perhaps rather aptly, we are taking a somewhat neutral line on the CHF into 2022. The franc offers a
Q4 2021: 1.05 mixture of offsetting attributes and a lack of dominant domestic drivers which suggest it may struggle
Q1 2022: 1.05 to find a firm directional narrative in the year ahead. While the CHF’s low yields suggest it has the
Q2 2022: 1.05 potential to act as a funding currency in an FX world increasingly tilting towards carry trades, the
Q3 2022: 1.05
dominance of a strong trade surplus could make it harder for financial flows to weaken the CHF, as
Q4 2022: 1.05
has been seen in recent months. The SNB’s presence will likely curb more notable currency
USD-CHF forecasts: strength, even if the central bank’s presence in the FX market is not as overwhelming as it has been
Q4 2021: 0.91 in the past. We therefore see EUR-CHF steady around 1.05 with CHF weakness versus the USD
Q1 2022: 0.92 solely a function of a fall in the EUR.
Q2 2022: 0.93
Q3 2022: 0.94 Trade no longer surplus to requirements
Q4 2022: 0.95 While G10 FX rarely takes its direction from developments within goods trade, we believe the CHF
may have been an exception in recent months. As the global economy has rebounded, Swiss export
growth has remained resilient. Meanwhile, import growth has slowed, pushing the trade surplus to
record levels on a nominal basis (Chart 1). There is, for now, little reason to expect a reversal. The
financial account has seen much weaker “hot money” inflows in 2021 while portfolio outflows
continued apace. The fact CHF has performed so well despite these negative developments on the
financial account suggests that it has been flows linked to the “real economy” which have driven the
currency.
SNB taking a slight breather

The nature of recent CHF appreciation is also likely behind the decline in SNB intervention in 2021.
We have pushed back against the idea that the central bank has completely stepped away from FX
purchases – the data clearly shows it has been buying FX (Chart 2) – but the pace has slowed. If the
SNB believes recent franc strength is more a function of export earnings than hot money inflows,
then it may be more accepting of grinding currency appreciation. We should also note that inflation,
while well below target, has at least pushed back into positive territory. This may also help to explain
some of the SNB’s reticence to intervene more aggressively in recent months.
1. Record trade surplus has likely been a 2. SNB is active in the FX market but not
stronger driver of the CHF as aggressively as in the past
% y /y, SZ trade balance, RHS CHFbn, CHFbn FX adjusted purchases/sales CHFbn
3mma SZ exports, LHS 3m av g Sight deposit 4w chg
SZ imports, LHS 40 40
20 6
30 FX purchases 30
5
10
4 20 20
0 3 10 10
2 0 0
-10
1
-10 -10
FX sales
-20 0
Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 -20 -20
Jan-18 Jan-19 Jan-20 Jan-21
21
November 2021
RMB: Overstretching
USD-CNY forecasts We acknowledge that the RMB may stay strong in the near term, because of US-China trade
Q4 2021: 6.40 talks (note: Chinese exporters have yet to restore their FX conversion ratios to levels seen
Q1 2022: 6.40 before trade tensions), optimism that China’s regulatory crackdown is taking a breather and a
Q2 2022: 6.45 potential pick-up of bond inflows related to World Government Bond Index (WGBI) inclusion.
Q3 2022: 6.50
Q4 2022: 6.55 However, assuming that there will not be a dramatic shift in US-China relations, we doubt that
USD-RMB and the DXY index can keep diverging from each other. Our productivity-adjusted
REER valuation method suggests that the RMB is already slightly overvalued. We believe China
has been subtly leaning against the RMB’s outperformance, via the fixings for instance.
It is difficult to be precise about the timing of the turning point for USD-RMB, but we forecast
USD-RMB to rise modestly in 2H22 due to the following considerations:
 Normalising trade surplus: China’s abnormally large trade surplus is partly because
COVID-19 created strong global demand for certain types of goods and caused production
disruptions elsewhere. This situation should correct when the pandemic is under control in
more parts of the world. The trade surplus is also likely to narrow when global growth
momentum (exports) slows more than domestic demand (imports). The OECD’s leading
indicator for the global cycle seems to be peaking, but China’s M1 growth has yet to bottom.
 Border re-opening: China’s border controls are restricting outbound tourism and outward
direct investment. China has indicated that there will be no foreign spectators at the 2022
Winter Olympics (4-20 February 2022) in Beijing, but it is unclear how long it will continue to
keep borders tightly closed thereafter when more parts of the world are opening up.
 The Fed’s rate hikes: While the RMB may not be affected much by the Fed ending its
bond purchases and draining USD liquidity, given its large current account surplus, we do
not believe it can be completely immune to the Fed’s rate hikes, as that would directly affect
residents’ FX hedging and portfolio investment decisions. The market is currently pricing in
one rate hike by 3Q22 and two by end-2022. Both the 2-year and 10-year China-US yield
differentials have already fallen to their respective 10-year historical averages (around
200bp and 135bp respectively). Historically, RMB depreciation episodes have coincided
with times when China’s yield advantage was persistently below a historical average. Now
that the infrastructure for Southbound Bond Connect and Wealth Connect has been set up,
residents’ outflows can readily accelerate when market conditions turn conducive.
1. The large current account buffer for the 2. But yield differentials are already
RMB may take time to narrow pointing to a higher USD-RMB eventually
200 USD bn 4.0% 6.0
175 3.0%
3.5% 6.2
150 2.5%
125 2.0% 3.0%
100 1.5% 6.4
75 2.5%
50 1.0%
0.5% 2.0% 6.6
25
0 0.0% 1.5% 6.8
(25) -0.5%
(50) 1.0%
(75) -1.0% 7.0
-1.5% 0.5%
(100)
(125) -2.0% 0.0% 7.2
14 15 16 17 18 19 20 21 14 15 16 17 18 19 20 21
Goods trade Services trade China-US 2y yield gap (LHS)
Primary income Secondary income China-US 10y yield gap (LHS)
Current account (% GDP, 4qma, RHS) USD-CNY (RHS, reverse scale)
Source: CEIC, HSBC Note: Shaded areas are periods when both the 2-year and 10-year yield gaps fall
below their respective historical averages. Source: Bloomberg, HSBC
22
November 2021
INR: The three P’s of positivity
USD-INR forecasts USD-INR has been broadly trading in a range-bound manner – oscillating between 72.50-75.50 –
Q4 2021: 75.50 so far in 2021. A stronger USD, abrupt jump in current account funding needs and a slower pace of
Q1 2022: 74.50
portfolio inflows are the key reasons that led to a move higher by USD-INR towards the top-end of
Q2 2022: 74.00
Q3 2022: 73.50 this range. That said, we believe USD-INR is likely to retrace towards the 73 level by end-2022, for
Q4 2022: 73.00 the following reasons (see, Asian FX Focus: INR: Winning Tests, 15 October 2021).
Positive core balance: India is currently seeing nearly USD4bn worth of FDI inflows on a monthly
basis. These inflows should help to offset the increase we expect in current account funding needs
from USD1-2bn this year to USD3-4bn per month in 2022. Higher crude oil price, semi-conductor
shortages and the upsurge in container freight prices are translating into a higher import bill and a
wider trade deficit – up from USD12bn during January-August to USD21bn since September.
However, a potential peak in supply side price pressures globally and growing local exports should
help to suppress the trade deficit to USD15bn in 2022. The other current account components –
services surplus, remittances and primary income outflows – could also improve modestly from the
current average of USD12bn (all on a monthly basis).
Potential to attract portfolio flows: Multiple narratives such as the government’s divestment
plans, digitisation theme, and developing electric vehicle (EV) ecosystem are likely to keep
foreign investors attracted towards Indian equities in 2022. Notably, the government expects to
complete the divestment of Bharat Petroleum Corporation Ltd (BPCL) and the IPO of Life
Insurance Company (LIC) worth USD7bn and USD12bn, respectively, before March 2022
(Livemint, 14 October 2021). Plus, we expect bond inflows are expected to improve as Indian
government securities are likely to be included in global indices in 2022. HSBC FI strategists
estimate USD6-10bn worth of inflows (assuming 0.3-0.5% of weight) in the event of inclusion in
the Bloomberg-Barclays Global Aggregate Index (BBGA) index and USD24-30bn worth of
additional inflows with a potential weight of 8-10% in the JP Morgan GBI EM index. India is also
on the watch list for inclusion in FTSE EMGBI index, with an announcement due in March 2022.
Policy normalisation should improve the yield advantage: The carry profile of the INR is
likely to improve as the RBI drains the excess INR liquidity (currently stands at about INR12trn)
and tightens its policy levers in 2022. The HSBC economics team thinks reverse repo hikes are
likely between December 2021 and February 2022. The normalisation of the policy rate corridor
should also pave the way for 100bps of repo rate hikes later in 2H-2022.
1. FDI inflows should plug India’s current 2. Equity inflows probably peaked, but we
account deficit expect bond inflows to improve
100 USD bn 4% 50
12M rolling sum
75 3% 40
50 2%
30
25 1%
0 0% 20
-25 -1% 10
-50 -2%
0
-75 -3%
-100 -4% -10
-125 -5% -20
2005 2009 2013 2017 2021* Jan-06 Jan-09 Jan-12 Jan-15 Jan-18 Jan-21
C/A Net FDI Core balance (% GDP, RHS) PI (Equity) PI (Debt) Net PI (USD bn)
Source: Bloomberg, HSBC. *2021 is annualised using 1H data Source: Bloomberg, HSBC
23
November 2021
IDR: A compelling story
Since July 2021, USD-IDR has broken away from the broad USD index and also from a
USD-IDR forecasts:
measure of USD against other high-yielding EM currencies. Even though the USD trended
4Q 2021: 14,000
higher, the IDR strengthened. It has been the top performer in Asia in 2H21 to date.
1Q 2022: 14,000
2Q 2022: 14,000 We believe the factors that have been supporting the IDR will remain relevant in 1H22:
3Q 2022: 14,100
 Indonesia’s trade balance rose to a record high in 3Q21 and will likely widen further, not
4Q 2022: 14,200
just because of surging prices of coal and palm oil (which are unlikely to correct materially in the
near term due to supply constraints), but also because of increasing manufacturing capacity in
iron and steel, and in the electric vehicle supply chain (note: more battery and EV auto plants are
set to start operating in 2022), for example. The manufacturing PMI rose to an all-time high in
October 2021. The non-commodity trade deficit has nearly closed, even with non-commodity
imports completely recovering from their pandemic lows.
 Portfolio equity inflows have been more than sufficient to offset foreigners’ outflows
from local currency bonds year to date, for the first time in Indonesia’s history. This is
probably related to Indonesia’s IPO boom, which looks likely to extend into 2022,
considering the expected listing by GoTo in 1H22 and the government’s plan to list several
SOEs (source: Bloomberg, 17 September 2021). At the same time, FDI inflows continue
to recover from the 3Q20 trough, after the watershed ‘Omnibus law’ was passed.
Thereafter, in 2H22, we assume the IDR will give back some of its earlier gains. We pick
the middle of next year as a turning point for two reasons. First, the peak period for dividend
outflows tends to be in May-July. Second, HSBC economists forecast Indonesia’s inflation to
rise notably then, from 1.5% year-to-date, to the lower end of Bank Indonesia’s 2-4% target in
early 2022, and then to 3-3.5% in 2H22. Indeed, by our calculations, base effects would be
particularly large (and positive) in June-July 2022. Credit growth should also have normalised by
then (with real GDP likely to be 5% above the pre-pandemic level by 2Q21, from 0% in 3Q21).
In 2H22, inflation rates in Indonesia could potentially exceed those in the US. When
Indonesia’s real yield advantage (versus the US) returns to a historical norm (c4%, from 8-9%
recently), there should be one fewer reason for USD-IDR to defy the broad USD trend.
To be clear, we are not forecasting a sharp sell-off in the IDR. HSBC economists expect BI to
start normalising policy in 3Q22 and HSBC fixed income research thinks the government’s fiscal
consolidation in 2022 may proceed faster than indicated (which would reduce the net bond
supply). Moreover, BI’s FX reserves have recently reached adequate levels (based on the IMF’s
metric), and the outstanding DNDF volume is low currently. There could also be a stronger
recovery in international tourism revenue by late 2022. The IDR is still a compelling currency
to own for carry, in our view.
1. Indonesia’s trade balance has widened 2. The IDR’s real yield advantage (vs USD)
into the largest surplus on record is expected to normalise in 2H22
Monthly avg per quarter, USD bn 10%
6
8%
4
6%
2 4%
0 2%
-2 0%
-2%
-4
-4%
-6
12 13 14 15 16 17 18 19 20 21 -6%
12 13 14 15 16 17 18 19 20 21 22 F
Coal Palm oil Oil & Gas
Iron and Steel Other Trade balance 10Y yield diff CPI diff Real 10Y yield diff
Source: CEIC, HSBC Note: We use headline CPI inflation. Source: Bloomberg, HSBC forecasts
24
November 2021
KRW: Path of resistance
USD-KRW forecasts We raise our USD-KRW forecasts (to 1160 for end-2022, from 1140 previously), but we still
Q4 2021: 1180 envisage a gradual move lower in the pair, despite a strengthening DXY index.
Q1 2022: 1175
Q2 2022: 1170  We estimate that the KRW is undervalued now, both on a REER basis (about 6%, the
Q3 2022: 1165 most since 2013), and bilaterally against the USD (about 8-11%).
Q4 2022: 1160
 The Bank of Korea’s rate hikes could increasingly support the KRW, perhaps by inducing
unhedged bond inflows from foreigners, or by curbing residents’ hoarding of FX deposits.
The correlation between the KRW and the 1-year ahead implied policy rate has recently
risen to be nearly as important as the influences of the DXY index and equity flows.
 The historical relationship between the KRW and the BoK’s rate hikes is inconsistent
but we think the impact this time around could be something in between the July 2010
– June 2011 rate hike cycle, when the undervalued KRW appreciated sharply (as
implied rates stayed elevated amid rising inflation, and amid the Fed’s QE2), and the
December 2017 – December 2018 cycle, when the fairly valued KRW only rose
modestly and briefly (until the Fed funds rate overtook the BoK’s policy rate and implied
rates for Korea started falling because of US-China trade tensions).
 It is possible that foreigners’ persistent equity outflows (USD50bn since end-2019) may
end or even reverse in 2022. Korean stocks’ significant outperformance over other EM
stocks has corrected lately, which should check rebalancing outflows. Foreigners’ holdings
now comprise just 29% of the market’s capitalisation – the low end of a 10-year range. That
said, we may only get more clarity on this after the presidential election on 9 March 2022.
We foresee some pushback to our view. Indeed, the KRW could face headwinds from
deteriorating terms of trade (falling DRAM export prices versus high energy import prices) and a
weakening exports outlook, with various leading indicators either stalling or already declining
(for example, electronics PMI and semiconductor equipment billings). However, we also think
Korea’s current account surplus may moderate more gradually than the trade balance, buffered
by a rapidly narrowing services deficit and an increasingly positive income balance,
which could partly reflect new structural trends rather than pandemic-related anomalies.
Meanwhile, regarding residents’ outflows, we note that retail investors’ purchases of foreign
stocks have been declining since May, as their diversification approaches a saturation point.
Also, the National Pension Service’s latest 5-year portfolio allocation plan indicated that it will
maintain its aim to have foreign and alternative securities comprise 55% of total assets (44%
currently), which marks the first time in recent years that it did not raise the target allocation.
1. Rate hike expectations for the BoK are 2. There could be factors offsetting the
becoming more important for the KRW narrowing goods trade balance in 2022
100% Correlation w ith KRW 125 USD bn
80% 100
60% 75
40% 50
20% 25
0% 0
BoK BoK
-20% rate rate (25)
-40% hike hike
cy cle cy cle (50)
-60% 10 11 12 13 14 15 16 17 18 19 20 21
10 11 12 13 14 15 16 17 18 19 20 21 Goods trade balance Services trade balance
DXY Kospi 1Y1M Pte invest.income bal
Source: Bloomberg, HSBC Note: We annualised January-September 2021 data. Source: CEIC, HSBC
25
November 2021
SGD: Green light

USD-SGD forecasts The MAS restored a positive slope for the SGD NEER policy band on 14 October 2021. Even though
Q4 2021: 1.35 it is expecting core inflation to rise rapidly from 1.1% in 3Q21 to slightly over 2% (exceeding its
Q1 2022: 1.34
implicit target) by 2Q22, it said that the policy adjustment was “slight”, “measured” and “deliberately
Q2 2022: 1.34
Q3 2022: 1.33 small”. Therefore, the MAS could very well tighten policy again in April 2022. If it raises the slope
Q4 2022: 1.33 by another 0.5ppt to 1%, then by the end of 2022, the midpoint of the band will return to the level
seen before the MAS re-centred the band (lower) on 30 March 2020.
A more aggressive response cannot be ruled out, if inflationary pressures remain firm and risks to
growth recede further. We will also look out for timelines regarding increases to the carbon tax (and
other levies to tackle climate change) and the Goods and Services Tax in the FY2022 Budget (mid-
February), as well as further consider the impact of government policies that aim to raise wages for
lower-paying jobs (the local qualifying salary requirement and the Progressive Wage Model).
In our model, the SGD NEER has risen from an average level of 0.7% above the midpoint in
January-September 2021 to an average of 1.2% above-mid in 4Q21 to date. We think the SGD
NEER can strengthen further, by at least another 1ppt, because of the positive slope and if
the index rises closer to the upper bound of the band. We believe the MAS will smooth the pace
of the SGD’s appreciation from time to time, but it will not seriously resist it. In a recent paper on a
Taylor rule model of its policy, the MAS calculated that a 1ppt increase in expected inflation has
historically engendered a 1.7ppt appreciation in the SGD NEER. Moreover, judging from the change
in the MAS’s FX reserves and outstanding FX forwards, we believe it has already drastically reduced
its intervention since 2Q21.
Despite our view of a rising DXY index, we forecast USD-SGD to fall to 1.33 by end-2022. We
believe the FX market will be differentiating currencies along three themes – monetary policy
trajectory, core balance of payments and border re-opening – and the SGD is ahead of the curve in
these aspects. In particular, we see room for the SGD to close its respective gaps with the AUD,
RMB, TWD, GBP and EUR – currencies it had underperformed since the pandemic started.
On FX forward points, we believe they have peaked, now that the MAS has restored an appreciation
bias for the SGD and since it is reducing its FX intervention. However, it may take some time
before points drop to par, since the slope is still accommodative and the level of the band has
yet to recover to pre-pandemic levels, unlike in April 2010 when the MAS normalised the slope (to
2%) and re-centred the band higher simultaneously. Moreover, US money market rates may only
rise more materially in 2H22 after QE ends and when the Fed contemplates a lift-off in the policy rate.
1. The SGD NEER may normalise to pre- 2. The MAS reduced FX intervention and
pandemic levels by end-2022 has turned hawkish
129 Index ed to 1st w eek of 1999=100 USD bn
25
128
20
127
15
126
10
125
124 5
1%?
123 0.5% 0
-1%
1% 0.5% (5)
122 0%
0.5% 0% 0.5%
121 (10)
2% 1%
120 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21
14 15 16 17 18 19 20 21 22 Chg in FX fwd book Est. spot intervention
HSBC SGD NEER MAS NEER Total intervention, 3mma
Source: MAS, HSBC Source: CEIC, HSBC
26
November 2021
PLN: Back in pole position

EUR-PLN forecasts A positive output gap and monetary policy normalisation are conducive to PLN-strength, in our
Q4 2021: 4.50 view. A significant move lower of EUR-PLN is all the more likely since Poland’s external position
Q1 2022: 4.40
is likely to remain comfortable and there is no FX valuation misalignment.
Q2 2022: 4.35
Q3 2022: 4.30
Q4 2022: 4.30 Strong cyclical drivers and monetary policy normalisation: Cyclical dynamics are positive
for the currency, in our view. The economy is back to its pre-pandemic level and the positive
momentum is likely to extend in 2022, supported by a particularly accommodative fiscal policy.
The HSBC economics team sees GDP growth above 5% for the second year in row in 2022,
which would mean that the output gap rapidly turns positive, possibly higher than in 2019. As a
result, inflation is likely to remain above the central bank’s target for an extended period of time.
But, the NBP has finally shifted its policy by hiking its policy rate by 115bp since October. For
us, recent hikes are just the beginning of a rate hike cycle and PLN-supportive. The HSBC
economics team sees the NBP front-loading its rate hikes, pushing the policy rate to 2.00%
(currently 1.25%) by early 2022. Note that such a policy rate would be 50bp above pre-
pandemic levels. But the crucial question is whether Poland needs an even higher terminal rate
with inflation persistently above 5.0% in 2022, risking a de-anchoring of inflation expectations
and even an inflation-wage spiral. This risk is significant, in our view, and we see markets
keeping the pressure on NBP to hike further. Overall, we believe that such a macro panorama
and rates perspective are conducive to PLN strength, particularly since history suggests that the
PLN reacts positively to rate hikes in a reflationary scenario.
External position should remain comfortable: The current account balance has deteriorated
in 2021 as the economy recovered and Poland received less EU funds. However, there is no
strong reason to think that the current account balance will not stay in surplus in 2022. More
importantly, our PLN forecast implicitly assumes that strong support will come via the sizeable
allocation to Poland from the EU Next Generation Fund, despite the recent political turbulence.
No sign of FX valuation misalignment: We believe that the NBP’s narrative around possible
FX intervention is no longer relevant as the economy normalises and in the context where there
is absolutely no sign of FX valuation misalignment, based on our metrics.
1. The end of an ultra-loose monetary 2. The PLN could be strongly supported by

policy is PLN-positive Next Generation EU Fund*
bp Policy rate minus headline inflation bp EUR bn Grants Loans
500 500 18
16
300 300
14
100 100 12
10
-100 -100 8
-300 -300 6
4
-500 -500 2
-700 -700 0
Jan-07 Jan-10 Jan-13 Jan-16 Jan-19 Jan-22 2021 2022 2023 2024 2025
Source: HSBC, Refinitiv, Bloomberg, Source: HSBC, EC. *available funds to Poland, which might be different than the
amount of funds the country applies for
27
November 2021
RUB: Realising its value

USD-RUB forecasts We believe that the rapidly normalising monetary policy and oil production will cause the RUB’s
Q4 2021: 70.00 valuation to normalise with USD-RUB falling to 65.0 in 2022.
Q1 2022: 68.00
Q2 2022: 65.00 CBR’s will likely bring the real policy rate back into positive territory: Since the start of
Q3 2022: 65.00 2021, inflation has been a key macro challenge but the central bank’s policy reaction has been
Q4 2022: 65.00
appropriate. The CBR is very clear about its objective to bring the real policy rate back to neutral
territory between 1-2% as quickly as possible. Such a policy objective will be achieved in 2022,
in our view. Admittedly, inflation may continue to surprise in the near term. However, the CBR
has shown no hesitation to adjust its policy rate accordingly and there is no reason to think that
its reaction will change in 2022. It is worth noting that the CBR sees its policy rate in a range of
7.3-8.3% in 2022 (currently at 7.50%), which is illustrative of its policy bias. For us, such a
conventional approach is clearly RUB-positive.
The current account surplus set to remain sizeable amid normalising oil production: The
RUB should also be supported by a sizeable current account surplus. The OPEC+ agreement has
limited Russia’s oil production in 2021 and the full impact of higher oil prices has not been reflected
in the FX market. However, we believe that the production is likely to fully normalise, returning to its
pre-pandemic level during the course of 2022. We also assume that the RUB will benefit from
Russia exporting a higher proportion of its production compared to 2021. Such trends are likely to
ensure a comfortable current account surplus even if oil prices retreat somewhat. The CBR
foresees a surplus of USD111bn with the oil price at USD65/barrel on average in 2022. Even if the
HSBC economics has a more conservative forecast for the surplus, the surplus is likely to be
anywhere between 3.5-5.5% of GDP. Admittedly, the CBR’s FX policy will likely offset part of this
surplus. FX purchases of about USD40bn in 2021 clearly limited the RUB’s gains and a repeat in
2022 is likely. However, we believe that the size of the current account will outweigh the FX
interventions and hence the CBR will only slow the pace of RUB appreciation.
USD-RUB to return to its fair value range: In the latter part of 2021, the RUB’s valuation has
started to normalise according to our PPP model. Given the dynamics discussed above, we
believe that such a normalisation should complete with USD-RUB returning comfortably to its
fair value range.
1. Real policy returning to its neutral range 2. Russia's oil output normalisation should
should support the RUB in 2022 support the current account surplus
Real policy rate HSBC Forecasts Million of barrel/day
% % 12 12
6 6
11.5 11.5
4 4
CBR's guidance on 11 11
2 2
neutral range
0 0 10.5 10.5
-2 -2 10 10
-4 -4 9.5 9.5
-6 -6 9 9
Source: HSBC, Refinitiv, Bloomberg, HSBC forecasts on based on the assumption Source: HSBC, Refinitiv
that the policy rate stays unchanged
28
November 2021
TRY: Lower rates, weaker FX

USD-TRY forecasts The Turkish central bank has embarked on a rate cut cycle despite high inflation and significant
Q4 2021: 9.80 pressure on the TRY. We believe the CBRT is likely to compress rates further in 2022 and
Q1 2022: 10.00
continue to display a tolerance of TRY weakness. We see further TRY weakness via three
Q2 2022: 10.50
Q3 2022: 10.60 channels:
Q4 2022: 10.70
1. A compression of real rates amid higher inflation expectations: The inflation panorama
remains an important macro challenge for the currency, particularly when rate cuts take place
amid rising inflation expectations. The re-establishment of the historical circularity between FX
and inflation is worth noting. The FX pass through to inflation is traditionally high and rather fast
in Turkey and the recent TRY depreciation could feed into inflation regardless of other
developments. In the feedback loop between FX and inflation, we believe that inflation
expectations could become an important variable for the exchange rate. Ultimately, high
inflation expectations are likely to make any disinflation process more difficult to achieve and in
turn compress actual and forward-looking real interest rates.
2. The risk of higher dollarisation: In the absence of sizeable foreign participation in the
domestic market, the behaviour of local investors remains pivotal. We believe that local appetite
for foreign currency is mainly a function of the real rate dynamics. This is related to the
discussion above. Nominal deposit rates have started to fall and this trend is likely to continue,
making TRY deposits less attractive. With the current level of inflation above the nominal
interest rate and with rising inflation expectations, the actual and the expected real deposit rates
by households and corporates could fall, increasing the demand for FX.
3. Interruption in current account improvement: We are also concerned by the potential

impact of the rapid and sizeable rate cuts to the current account balance. The shift towards an
accommodative policy stance could interrupt the recent positive trend and even reverse it.
Note that to determine where USD-TRY may be heading, we used our PPP model as a guide.
Our 10.70 forecast reflects an undervaluation of about 30% versus the current fair value range –
similar to November 2020, just before the central bank changed its policy with a conventional
tightening. Uncertainty is high as much will depend on how deeply negative the real policy rate
will be in the coming months and the CBRT’s degree of tolerance of FX weakness. The risk is
for a wider TRY undervaluation.
1. Real rate compression is TRY-negative 2. Increased dollarisation is a notable risk

Average cost of funding - CPI (bp) USDbn Residents' FX deposits USDbn
800 800 220 220
600 600
200 200
400 400
180 180
200 200
160 160
0 0
140 140
-200 -200
-400 -400 120 120
-600 -600 100 100

Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Jan-13 Jul-14 Jan-16 Jul-17 Jan-19 Jul-20
Source: HSBC, Refinitiv, Bloomberg, Source: HSBC, CBRT
29
November 2021
ZAR: Battling the USD with buffers

USD-ZAR forecasts The ZAR is likely to weaken modestly in 2022, in our view, reflecting a stronger USD more so
Q4 2021: 15.00 than a strong idiosyncratic reason to be excessively bearish on the ZAR. We see three broad
Q1 2022: 15.30
buffers for the rand in the coming quarters.
Q2 2022: 15.50
Q3 2022: 15.70 No valuation misalignment: Despite a strong performance since Q2 2020, the ZAR does not
Q4 2022: 15.90
display any sign of overvaluation. The currency appreciation has been in line with South Africa’s
terms of trade gains. Our PPP model also suggests that the ZAR is rather fairly valued. Contrary
to many EM economies, inflation has been well contained in South Africa, mechanically limiting
the downside pressure on the nominal effective exchange rate. Admittedly, these factors are not
static and are likely to evolve and probably deteriorate somewhat over the next few quarters.
But, the starting point for 2022 is a healthy valuation, in our view.
External position may display some resilience: The dynamic of the current account balance
is crucial for the ZAR’s outlook. As the economy normalises and terms of trade gains run out of
steam, the trade and current account surplus are likely to narrow in coming quarters. The HSBC
economics forecasts a small current account deficit of about 0.5% of GDP in 2022. The swing
from a sizeable surplus to a tiny deficit may weigh on the currency. However, the pace of the
deterioration will matter for the dynamic of the currency. The adjustment could be slow.
Moreover, the scale of deterioration is surrounded by numerous uncertainties (commodity
prices, scale of inventory rebuilding, strength of SA domestic demand amid record
unemployment, etc.), in our view. Therefore, we would not be surprised if the external position
continues to display some signs of resilience in 2022.
Credible monetary policy amid moderate inflation and contained fiscal risks: The SARB’s
policy credibility is pivotal factor, in our view, of a limited ZAR depreciation in 2022. The central
bank has been prudent and conventional since the eruption of the pandemic and we expect this
policy approach to continue. The SARB is likely to start a rate hike cycle but policy normalisation
will be relatively limited in scale (HSBC economics sees the policy rate at 4.75% at the end of
2022 vs 3.50% currently) as inflation is likely to remain within the target range of 3-6%.
Admittedly, the fiscal situation remains challenging but the windfall related to high commodity
prices is likely to contain some of the fiscal risk both for the SARB and the currency.
1. Terms of trade gains have been pivotal 2. The C/A is likely to deteriorate in 2022
in ZAR's performances but the pace will matter for the ZAR
NEER ToT (rhs) Trade Service
30% 14% Income Transfer
y /y change in % both ax es 10% 10%
Current account
20% 10% 8% 8%
% of GDP both ax es
10% 6% 6% 6%
4% 4%
0% 2%
2% 2%
-10% -2% 0% 0%
-20% -6% -2% -2%
-4% -4%
-30% -10%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -6% -6%
Q1 15
Q3 15
Q1 16
Q3 16
Q1 17
Q3 17
Q1 18
Q3 18
Q1 19
Q3 19
Q1 20
Q3 20
Q1 21
2010 2011 2012 2013 2015 2016 2017 2018 2020 2021
Source: HSBC, Refinitiv, Bloomberg Source: HSBC, Refinitiv
30
November 2021
BRL: Inflation and fiscal strains
There are two key stressors influencing the BRL presently, and these will likely remain
USD-BRL forecasts:
4Q 2021: 5.60 relevant in 2022. The first is high inflation, which has been putting the central bank under
1Q 2022: 5.70 pressure to hike rates at an increasingly rapid pace. The second is the fiscal outlook. The
2Q 2022: 5.80 government is trying to find more room to expand spending in 2022 – an election year – and
3Q 2022: 5.80 while the country’s spending cap rules provide a strong fiscal anchor, these rules can be
4Q 2022: 5.70 tweaked via legislation passed by Congress. The government’s efforts to expand its social
programmes (to raise monthly payments and increase those persons covered), as well as other
measures such as fuel subsidies for truck drivers, necessitate constitutional amendments in
Congress. Recently, the market has been concerned that these amendments could see the
deficit widen in 2022, and there are also fears of more adjustments next year and beyond.
Brazil is experiencing high inflation from a number of sources, including tariffs, supply
disruptions, high energy and electricity prices and a weaker BRL. Inflation expectations have
also been rising, forcing the BCB to become more aggressive in its hikes. Fiscal risks have
added pressure for tighter policy, but the BCB has met this challenge and maintained its
credibility in our view. Our economists see the Selic rate peaking at 10.25% (with risks to the
upside), and inflation topping out in December or January, before falling quite rapidly in 2022.
The BRL faces the balance of these risks, including sub-1% growth in 2022, with some analysts
expecting a recession. We could also see further fiscal slippage. However, some positives may
include the rise in real yields as inflation declines and an improving current account as imports
fall, which could offer the BRL some support. The BRL also looks cheap (see chart below), and
if the above risks are contained we may see USD-BRL stabilise around the 5.50-80 area.
However, a deterioration of fiscal and political risks could see USD-BRL threaten a break of
6.00, potentially inviting stronger intervention by the BCB.
Election uncertainty adds another blind spot, and if the centre-right parties can rally around a
single candidate, this could be a positive development for the BRL, but that likely wouldn’t come
until Q3, we believe. Currently, ex-president Luiz Inácio Lula da Silva (“Lula”) is leading the
latest polls (XP/Ipespe, 25-28 October), but there is still uncertainty what his mandate would
involve. On balance we see USD-BRL remaining well-supported, and ending 2022 at 5.70.
1. BRL is about 25% cheap vs 10y REER 2. Real yields set to rise as CPI falls
Current REER relative to 10-year average %
60% 15
40%
"rich"
10
20%
5
0%
"cheap"
-20% 0
Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22
-40% Selic rate IPCA inflation
Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
HSBC Selic forecast HSBC Inflation forecast
ARS BRL CLP
COP MXN PEN
Source: BIS, HSBC Source: BCB, HSBC
31
November 2021
MXN: Structural factors wane
We think the positive cyclical factors that supported the MXN in 2021 are starting to fade, which
USD-MXN forecasts:
4Q 2021: 20.00 may leave the currency exposed to some structural weaknesses in 2022 including low
1Q 2022: 20.25 productivity, weak private investment, and a historically low fiscal revenue base. The risk of
2Q 2022: 20.50 stagflation in Mexico is still low but rising, as supply side shortages (in semiconductors for
3Q 2022: 20.75 example) have affected manufacturing output directly while inflationary pressures continue to
4Q 2022: 21.00 propel expectations higher. Combined with the withdrawal of monetary stimulus in the US, we
think the level of macroeconomic uncertainty is much higher now than at any time in 2021 and
will remain the case through H1 2022.
2021 has seen an export-sector-led recovery linked to greater US fiscal stimulus, which
prompted higher consumer demand for Mexican goods abroad while simultaneously keeping
workers' remittances high. Meanwhile, Mexico's weak gross fixed investment and low domestic
consumption was perversely positive for the MXN as this scenario translated into net USD
inflows. However, US activity now appears to be peaking, which makes Mexico's external sector
vulnerable and potentially leaves room for disappointment on a median economist survey GDP
growth forecast of 3% next year (Bloomberg).
Moreover, the persistence of higher inflation coupled with a less aggressive central bank
tightening cycle relative to LatAm peers makes Mexico's ex-ante real yield look less attractive
than it used to. While MXN's carry-to-volatility ratio remains relatively high, we think it can be
surpassed by EM peers in the future. It also offers somewhat poor compensation for rising
political risks such as a government policy proposal to squeeze private companies out of the
electricity sector and entrench control over generation, transmission and distribution inside a
single state-owned entity.
We think the main offsetting positive factor for the currency may come from the government's
prudent fiscal stance as the Finance Ministry's primary deficits targets for 2021 and 2022 are
relatively conservative and more importantly, look credible from the market's perspective. The
government's official target of stabilising Mexico's debt-to-GDP levels around 51% is a positive
differentiator compared to other EM economies. But we believe supportive fiscal dynamics by
themselves are not enough to strengthen the currency, particularly when facing off against
weaker fundamentals and higher political risks.
1. The export led recovery is waning 2. Mexico real rates are less attractive
8 80% 5%
USD bn
6 60% 4%
4 3%
40%
2 2%
20%
0 1%
0%
-2 0%
-4 -20% -1% Real rate (ex-ante)
% YoY Real rate (ex-post)
-6 -40% -2%
2018 2019 2020 2021 Avg 5Y (ex-ante)
-3%
Trade bal Exports (RHS) Imports (RHS) 2015 2016 2017 2018 2019 2020 2021
Source: Haver, HSBC Ex-ante rates using 1m CPI expectations. Source: Haver, HSBC.
32
November 2021
CLP: Persistent fiscal risk premia
Although political tensions may moderate somewhat after the November 2021 elections, the
USD-CLP forecasts:
Q4 2021: 800 implicit risks to the wider fiscal and macroeconomic outlook are likely to remain, in our view. A
Q1 2022: 810 new president takes office in March 2022 while the constitutional reform process is set to
Q2 2022: 820 continue through July 2022 followed by a public referendum in the second half of the year.
Q3 2022: 830 Regardless of the result, we think these developments should represent higher political
Q4 2022: 840 uncertainty and market volatility for many months to come.
Our biggest concerns are that: (1) public debt levels could rise to as much as 50% of GDP (from
35%) over the next 3-5 years, while (2) the fate of the private pension fund system remains
uncertain following several rounds of withdrawals during the pandemic. Such developments
could imply a heavier reliance on foreign portfolio inflows to finance public deficits at a time
when Chile's fiscal buffers have been eroded. Public savings were drained during the pandemic
due to massive health spending and cash transfers in the form of the Emergency Family Income
(IFE) programme. Chile's sovereign wealth funds (which consist of both the economic and
social stabilisation fund as well as the pension reserve fund) started 2020 with a combined total
of USD23bn but that has now been sharply reduced to USD10.5bn as of August 2021.
Meanwhile, external factors such as higher imported energy prices are hurting Chile's terms of trade
when measured against relatively stable copper prices, as we expect supply-demand dynamics on
the latter to remain tight. From that perspective, CLP does not look undervalued in our view. Also,
while economic activity surprised to the upside in 2021, the central bank survey indicates local
economists have cut expected GDP growth for 2022 by a full percentage point over the last five
months to 2.50%, which we think is directly linked to concerns over the shift in political dynamics.
On top of this, Chile now has a serious inflation problem, which aggressive central bank hikes have
not yet been able to contain. However, if inflation peaks and then declines in 2022, this could be a
catalyst for CLP strength as curves flatten and ‘receiver’ rates trades look more appealing.
Overall, the less predictable social and political outlook demands a greater risk premium for the
CLP as it carries negative fiscal implications -- particularly if we see unorthodox economic
proposals in the new constitution. We therefore see USD-CLP moving higher to 840 by the end
of 2022, compared to a median Bloomberg survey forecast of 805.
1. Chile's current account deficit has 2. Local pension funds have carried out
returned to pre-pandemic levels massive dollarisation in Q3 2021
3 8% 10%
USD bn
2 6% 5%
1 4% 0%
0 2%
-5%
-1 0%
-10%
-2 -2%
% AUM
-15%
-3 -4%
-4 -6% -20%
2015 2016 2017 2018 2019 2020 2021 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21
% of GDP (RHS) Current account (USD bn) Riskier funds Blended funds Conservative funds
Source: Haver, HSBC Source: Bloomberg, HSBC
33
November 2021
COP: Political and fiscal risks
We think Colombia's twin deficits will remain the major challenges for the currency in 2022,
USD-COP forecasts:
Q4 2021: 3850 despite the approval of an updated tax reform in September which we estimate will boost fiscal
Q1 2022: 3875 revenues by a net 0.7% of GDP starting in 2023. The reform only provides short-term relief from
Q2 2022: 3900 further fiscal slippage, in our view, while doing little to put the public debt trajectory on a
Q3 2022: 3900 sustainable path.
Q4 2022: 3900
Moreover, a lot depends on the next government, with parliamentary elections due in March
2022 and presidential elections in May 2022. Our concern is that the pandemic has left little
appetite for fiscal restraint among the wider population, which increases the level of uncertainty
with respect to the potential outcomes in these elections. The unpredictability of political
dynamics may also cause a slowdown in private investment next year (alongside a higher
corporate income tax rate of 35% from the tax reform) which we think puts downside risks on
the central bank's economic activity projection of 3.9% YoY.
On the external accounts side, our economists also expect the current account deficit to widen
further in 2022 to 4.7% of GDP, one of the highest in LatAm. This is despite the recent recovery
in oil prices, as domestic demand has been stronger than expected due to the reopening of the
economy. More importantly, FDI has only recovered to around 62% of pre-pandemic levels,
leaving less stable portfolio flows to cover the gap. These current account pressures are likely to
force the COP to keep a risk premia through H1 2022.
The counterbalance to these negative factors is that Colombia’s central bank recently kicked off
its rate tightening cycle with the composition of votes suggesting we could see a faster pace of
hikes going forward and possibly an above-neutral terminal rate. Such a restrictive stance could
work in the COP's favour as inflation risks are more contained in Colombia than in other LatAm
countries. Indeed, while headline inflation is running at 4.58% YoY, the average of its four core
inflation indices still looks well behaved and under BanRep's target. Further, investors should
watch for a peak in inflation, which, when seen, could trigger a turning point for the COP.
Overall, we expect the COP to face multiple challenges in H1 2022 due in large part to the
political risks stemming from high electoral uncertainty, though this could be mitigated
somewhat by stronger oil prices and potentially higher real rates. However, the currency's
performance in H2 2022 is less clear as it depends in large part on how the next administration
views the fiscal consolidation process.
1. FDI not financing current account deficit 2. Core inflation still looks well behaved
40 9%
USD bn
35 Headline CPI
8%
30 Avg 4 Core Indices
7%
25 BanRep target
6%
20
15 5%
10 4%
5 3%
0 2%
2013 2014 2015 2016 2017 2018 2019 2020 2021
1%
Portfolio flows FDI Current acct deficit
2015 2016 2017 2018 2019 2020 2021
Source: Haver, HSBC Source: Haver, HSBC
34
November 2021
Gold & Silver: Balancing act
James Steel Gold Outlook

Chief Precious Metals Analyst
Gold prices are down 6.1% year-to-date as monetary and fiscal policy is gradually withdrawn
HSBC Securities (USA) Inc.
james.steel@us.hsbc.com globally. The onslaught of tapering and the withdrawal of some monetary stimulus, followed at
+1 212 525 3117
some point in the future by rate hikes, will present considerable headwinds to gold rallies for the
next couple of years, we believe. Countries outside the US are also looking to tighten monetary
policies. This explains the decline in institutional demand in the form of ETF liquidation this year
Gold forecasts:
after stellar gains in 2020. If gold demand were based solely on this declining investor interest
2021 average: USD1,770/oz
2022 average: USD1,740/oz alone, gold prices would likely weaken for the rest of this and next year. All is not negative,
2023 average: USD1,715/oz however. As the institutional investment market has declined, the physical market, notably jewellery,
is recovering. Moreover, not all investors may turn away from gold as tapering unfolds. Geopolitical
and trade risks have the potential to propel gold higher. Retail demand for coins & bars is strong,
powered by inflation and other concerns, and may stay firm. Central bank purchases, after
weakening in 2020, are up sharply, and we believe this component of demand – along with an
upsurge in jewellery – will effectively support the market. Thus, the market continues to rebalance
and recalibrate, from an investment-led dynamic to a more balanced dynamic. For the full report
please see Gold outlook: Balancing act (5 October).
Monetary and fiscal policies less supportive, firmer USD a negative

Monetary stimulus looks set to wane just as many governments, their deficits bloated by pandemic-
fighting measures, are cutting fiscal support too. This combination should also restrain gold prices.
HSBC’s US Economist Ryan Wang projects one 25bp rate hike in June 2023 and another 25bp hike
in December. This would be a mixed bag for gold, but, on balance, negative. Tapering, which is
commencing, is a negative but having been flagged well in advance is unlikely to be a destabilising
influence on gold. The direction of longer-term yields is also important for gold. Historically,
movements in 10-year US Treasury yields have been especially influential in driving gold prices. The
rise in longer-term real yields earlier this year helped reverse gold’s long-running rally. In Fixed
Income Asset Allocation: Something’s gotta give (10 November 2021), HSBC’s Steven Major, global
head of fixed income research, reaffirms the team’s forecast of 1.5% for the US 10-year Treasury for
2021 and 1.0% in 2022. This should support gold. Historically, USD levels have exerted a significant
influence on gold and, normally, gold trades inversely with the USD. Our FX strategists’ present
reasons for further (modest) USD appreciation. A scenario where the USD continues to gradually
rise into 2022 is gold negative. The team shows that the USD is a counter-cyclical currency. It tends
to underperform when global growth is accelerating but recover when the opposite conditions
emerge. The peaking of global growth should therefore aide the USD. The team points out that the
forecasts for USD appreciation are modest, so the impact on gold should be correspondingly mild.
Physical shines
Underlying physical demand for gold – about half of which is usually absorbed by the jewellery
market – is sometimes little discussed, but is a key determinant of price. After sharp contractions in
2020, jewellery demand is recovering in line with the global economic recovery. According to the
World Gold Council, Q3 demand rebounded 33% y-o-y to 443t. Jewellery demand has grown 50%
for the year so far. Higher income, lower unemployment and global growth as forecast by the HSBC
35
November 2021
economics team should support demand going forward. While much smaller than jewellery, coins &
bars are still an important component of overall demand and provide a window on retail sentiment.
The WGC reports global bar & coin demand in Q3 reached 262t, an 18% y-o-y increase. Growth was
driven by a 56% increase in global bar investment (to 178t). Any increase in financial market or
geopolitical uncertainty is also likely to trigger greater coin & bar demand. Higher inflation may also
trigger greater retail demand.
The official sector is an important source of gold demand and like jewellery is sometimes little
discussed. After declining in 2020, central bank demand has already doubled this year to nearly 400t.
Two important developments hold positive implications for future demand: the recovery in global
trade, and higher oil prices. Both provide EM central banks with ample USDs with which to buy gold.
Geopolitical tensions can also raise official sector demand.
Balanced against this demand increase is a recovery in mine supply after 2020 COVID-19
lockdowns. But this is being offset by weaker recycling levels. Also, the longer-term outlook is for
plateauing mine supply increases at best, based mostly on declining ore grades.
Silver is bouncing back

Silver prices have been volatile this year, but on a general downward slope. After starting the year on
Silver forecasts:
a weak note – in line with gold – prices had jumped to a year-to-date high of USD30/oz by 1
2021 average: USD25.05oz
2022 average: USD24.30oz February. After slipping to near USD21/oz in late September prices have been higher, if volatile. We
2023 average: USD25.00/oz look for firm prices over the next couple of years. Silver is both an industrial and a precious metal.
The perceived withdrawal of monetary and fiscal stimulus is weighing on silver, as it has on gold.
Physical demand increases may play a crucial role in supporting silver prices going forward. Silver is
a key component in a wide variety of industrial and manufacturing processes. Industrial demand is
up and may rise further – despite the chip shortage – for the next several years. Some of the key
growth areas include solar, power, electronics and biosciences.
Price-sensitive retail buyers are boosting demand in the key coin & bar markets, where inflation
scares and uncertainty may also boost demand. Jewellery demand is rising, buoyed by rising income
and pent-up demand. We expect this to continue through 2023. Heretofore depressed silver imports
into India are likely to recover, while China imports should remain firm.
Silver mine output is also rebounding after 2020 COVID-19 mine lockdowns. This will supply material
for expected demand increases. We look for gains in both primary and by-product silver output.
Prices are high enough to incentivise production. Scheduled mine ramp-ups and some new projects
should aide primary silver output, although grade depletion is set to partially offset gains. The majority
of silver is mined as a by-product of other metals and we forecast gains in gold and base metals
output will raise silver output. Recycling supply should be capped as the need for distressed recycling
recedes. Prices rallies – like the one seen in January – may be limited not, just by mine supply
increase but also by the mobilisation of ample above ground stocks.
Deficits should support prices

Based on our supply/demand model we expect silver to move from a 205moz deficit in 2020 to a
narrow 9moz surplus this year. This should be followed by mild but growing deficits in 2022-23. This
helps explain 2021 price weakness, but should support silver going forward. Greater physical
demand will be key in offsetting reduced institutional investor interest. For the full report see, Silver
Outlook: Bouncing back, 7 October.
1. HSBC average gold price forecasts – unchanged

USD/oz ______ 2021f _______ _______ 2022f ________ ______ 2023f _______ ____ Long Term _____
Old New Old New Old New Old New
Gold 1,830 1,770 1,800 1,740 1,785 1,715 1,600 unchanged
Silver 27.50 25.05 26.80 24.30 26.00 25.00 24.00 unchanged
Note: Long term = five years. Year-end 2021 and 2022 forecasts for gold are USD1,770/oz and USD1,730/oz, respectively. Year-end 2021 and 2022 forecasts for gold are USD1,900/oz and
USD1,830/oz, respectively. Year-end 2021 and 2022 forecasts for silver USD23.00/oz and USD24.40/oz, respectively.
36
November 2021
HSBC Little Mac Valuation Ranges
When using a REER to measure whether a currency is over/under valued, it is necessary to

compare the current value of the REER to some reference value. Calculating REERs is a simple
task – the difficulty in using them for FX valuation is deciding on which reference value to choose.
A common approach is to use a moving average value of the REER as the reference. However,
this requires an arbitrary choice of window length to use for the moving average. One person
might believe that a five-year window was an appropriate choice whereas someone else might
choose 10 years. These choices will regularly give contradictory valuations and there is no
principled way to choose between them.
Our methodology circumvents this problem by using all possible window lengths of five years
and more. Each window choice gives a different valuation and we use the entire range of these
valuations. If they all give a consistent valuation signal then this gives us some confidence of
the direction of valuation.
Procedure to calculate the HSBC Little Mac Valuation Ranges

1. We create single currency pair REERs, beginning at 100 in January 1999.
2. We calculate average values of the REER for all recent time windows which are at least
five years in length1.
3. We use the spot moves since the most recently available inflation data to estimate the
value of the REER today2.
4. For each average value of the REER calculated in step 2, we calculate what value of the
exchange rate would move our estimated value of the REER today (step 3) to the average.
We use this value as one of our estimated PPP values.
5. The range of the entire set of the estimated PPP values (step 4) constitutes our HSBC Little
Mac Valuation Range for this currency pair.
For full details of the construction methodology, please see “HSBC Little Mac Valuation
Ranges”, September 2015.
Current valuation ranges
Fair
value
above
spot
Fair
value
below
spot
Source: HSBC, Refinitiv Datastream
______________________________________
1 The maximum window length over which we calculate an average value is from January 1999 to today.
2 We make the assumption that the most recently observed YoY change in CPI will also be the YoY change observed for this month in
estimating this REER value.
37
November 2021
EUR-USD HSBC Little Mac Valuation Range
GBP-USD HSBC Little Mac Valuation Range
USD-JPY HSBC Little Mac Valuation Range
38
November 2021
AUD-USD HSBC Little Mac Valuation Range
NZD-USD HSBC Little Mac Valuation Range
USD-CAD HSBC Little Mac Valuation Range
39
November 2021
USD-CHF HSBC Little Mac Valuation Range
USD-NOK HSBC Little Mac Valuation Range
USD-SEK HSBC Little Mac Valuation Range
40
November 2021
HSBC forecasts vs forwards
EUR-USD vs forwards EUR-CHF vs forwards

EUR-USD Forward Forecast EUR-USD EUR-CHF Forward Forecast EUR-CHF
1.60 1.60 1.70 1.70
1.60 1.60
1.50 1.50
1.50 1.50
1.40 1.40 1.40 1.40
1.30 1.30 1.30 1.30

1.20 1.20
1.20 1.20
1.10 1.10
1.10 1.10 1.00 1.00
0.90 0.90
1.00 1.00
Source: Refinitiv Datastream, Reuters, Bloomberg, HSBC Source: Refinitiv Datastream, Reuters, Bloomberg, HSBC
GBP-USD vs forwards EUR-GBP vs forwards

GBP-USD Forward Forecast GBP-USD EUR-GBP Forward Forecast EUR-GBP
2.10 2.10 1.00 1.00
2.00 2.00 0.95 0.95
1.90 1.90
1.80 1.80 0.90 0.90
1.70 1.70 0.85 0.85
1.60 1.60
1.50 1.50 0.80 0.80
1.40 1.40 0.75 0.75
1.30 1.30
0.70 0.70
1.20 1.20
1.10 1.10 0.65 0.65
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21
USD-JPY vs forwards EUR-JPY vs forwards

USD-JPY Forward Forecast USD-JPY EUR-JPY Forward Forecast EUR-JPY
130 130 175 175
165 165
120 120
155 155
110 110 145 145
135 135
100 100
125 125
90 90 115 115
105 105
80 80 95 95
70 70 85 85
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21
41
November 2021
Policy Rates
end period 2021 2022 2023

Current Q3 Q4f Q1f Q2f Q3f Q4f Q1f Q2f
North America
US 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.375
Canada 0.25 0.25 0.25 0.25 0.50 0.75 1.00 1.25 1.25
Asia
Mainland China* 3.85 3.85 3.85 3.85 3.85 3.85 3.85 3.85 3.85
Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10
India 4.00 4.00 4.00 4.00 4.00 4.25 4.50 4.50 4.75
Indonesia 3.50 3.50 3.50 3.50 3.50 3.50 3.75 3.75 4.00
South Korea 0.75 0.75 1.00 1.00 1.00 1.25 1.25 1.25 1.25
Malaysia 1.75 1.75 1.75 1.75 1.75 2.00 2.00 2.25 2.25
Thailand 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50
Australia 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
New Zealand 0.50 0.25 0.75 1.00 1.25 1.50 1.50 1.75 1.75
Western Europe
EMU - Refi 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
EMU - Deposit -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50
UK 0.10 0.10 0.10 0.25 0.25 0.50 0.50 0.75 0.75
Norway 0.25 0.25 0.50 0.50 0.75 1.00 1.25 1.25 1.50
Sweden 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Switzerland -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75
CEEMEA
Poland 1.25 0.50 1.50 2.00 2.00 2.00 2.00 2.00 2.00
Hungary 1.65 1.65 3.00 3.50 4.00 4.00 4.00 4.00 4.00
Turkey** 16.00 18.00 15.00 13.00 11.00 11.00 11.00 10.00 10.00
Russia 6.75 6.75 8.00 7.25 7.25 7.00 6.75 6.50 6.50
Israel 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
South Africa 3.50 3.50 3.75 4.00 4.25 4.50 4.75 5.00 5.25
Latin America
Mexico 4.75 4.75 5.75 6.00 6.00 6.00 6.00 5.25 5.75
Brazil 7.75 6.25 9.25 10.25 10.25 10.25 9.75 8.75 7.75
Colombia 2.00 2.00 3.25 4.00 4.50 4.50 4.50 4.50 4.50
Chile 2.75 1.50 4.00 5.50 6.00 6.00 6.00 5.50 5.00
Source: HSBC *one-year Loan Prime Rat e **one-week repo rat e Not e: Last updat ed 11 November 2021 at 11:00 UKT
42
November 2021
Exchange Rates vs USD

end period 2020 2021 2022
Q3 Q4 Q1 Q2 Q3 Q4f Q1f Q2f Q3f Q4f
G10 x
Eurozone EUR-USD 1.17 1.22 1.17 1.19 1.16 1.15 1.14 1.13 1.12 1.10
UK GBP-USD 1.29 1.37 1.38 1.38 1.35 1.34 1.33 1.32 1.31 1.30
Japan USD-JPY 105 103 111 111 111 113 114 114 115 115
Australia AUD-USD 0.72 0.77 0.76 0.75 0.72 0.74 0.74 0.74 0.74 0.74
New Zealand NZD-USD 0.66 0.72 0.70 0.70 0.69 0.72 0.71 0.70 0.69 0.68
Canada USD-CAD 1.33 1.27 1.26 1.24 1.27 1.25 1.26 1.27 1.27 1.28
Sw eden USD-SEK 8.96 8.23 8.73 8.55 8.76 8.70 8.95 9.20 9.46 9.82
Norw ay USD-NOK 9.33 8.58 8.55 8.60 8.75 8.52 8.68 8.85 9.02 9.27
Sw itzerland USD-CHF 0.92 0.89 0.94 0.92 0.93 0.91 0.92 0.93 0.94 0.95
Asia
North Asia
Mainland China USD-CNY 6.79 6.53 6.55 6.46 6.44 6.40 6.40 6.45 6.50 6.55
Hong Kong USD-HKD 7.75 7.75 7.77 7.77 7.79 7.80 7.80 7.80 7.80 7.80
Taiw an USD-TWD 29.0 28.1 28.5 27.9 27.8 28.0 28.0 28.2 28.4 28.5
South Korea USD-KRW 1170 1087 1132 1126 1184 1180 1175 1170 1165 1160
South Asia
India USD-INR 73.8 73.1 73.1 74.3 74.2 75.5 74.5 74.0 73.5 73.0
Indonesia USD-IDR 14880 14050 14525 14500 14313 14000 14000 14000 14100 14200
Malay sia USD-MYR 4.16 4.02 4.15 4.15 4.19 4.15 4.12 4.10 4.08 4.05
Philippines USD-PHP 48.5 48.0 48.5 48.8 51.0 50.0 50.0 50.5 51.0 52.0
Singapore USD-SGD 1.37 1.32 1.34 1.35 1.36 1.35 1.34 1.34 1.33 1.33
Thailand USD-THB 31.6 30.0 31.2 32.1 33.7 32.8 32.6 32.3 32.0 31.8
Vietnam USD-VND 23184 23098 23065 23008 22761 22525 22500 22600 22700 22800
CEEMEA
Czech Republic USD-CZK 23.1 21.5 22.3 21.5 21.9 22.1 21.9 22.0 22.2 22.6
Hungary USD-HUF 310 297 309 296 310 300 298 301 304 309
Poland USD-PLN 3.87 3.73 3.95 3.81 3.98 3.91 3.86 3.85 3.84 3.91
Israel USD-ILS 3.43 3.21 3.34 3.26 3.22 3.20 3.15 3.10 3.00 3.00
Russia USD-RUB 77.7 74.0 75.7 73.1 72.7 70.0 68.0 65.0 65.0 65.0
Turkey USD-TRY 7.72 7.44 8.25 8.71 8.89 9.80 10.00 10.50 10.60 10.70
South Africa USD-ZAR 16.75 14.69 14.78 14.29 15.07 15.00 15.30 15.50 15.70 15.90
LatAm
Argentina USD-ARS 76.18 84.15 91.99 95.72 98.74 110.00 120.00 125.00 135.00 145.00
Brazil USD-BRL 5.61 5.19 5.63 4.97 5.44 5.60 5.70 5.80 5.80 5.70
Chile USD-CLP 784 711 719 734 810 800 810 820 830 840
Mex ico USD-MXN 22.11 19.91 20.43 19.94 20.64 20.00 20.25 20.50 20.75 21.00
Colombia USD-COP 3828 3428 3663 3752 3809 3850 3875 3900 3900 3900
Peru USD-PEN 3.60 3.62 3.74 3.87 4.13 4.00 4.00 3.95 3.90 3.90
Source: HSBC
43
November 2021
G10 Exchange Rates

end period 2020 2021 2022
vs USD x
Eurozone EUR-USD 1.17 1.22 1.17 1.19 1.16 1.15 1.14 1.13 1.12 1.10
UK GBP-USD 1.29 1.37 1.38 1.38 1.35 1.34 1.33 1.32 1.31 1.30
Japan USD-JPY 105 103 111 111 111 113 114 114 115 115
Canada USD-CAD 1.33 1.27 1.26 1.24 1.27 1.25 1.26 1.27 1.27 1.28
Australia AUD-USD 0.72 0.77 0.76 0.75 0.72 0.74 0.74 0.74 0.74 0.74
New Zealand NZD-USD 0.66 0.72 0.70 0.70 0.69 0.72 0.71 0.70 0.69 0.68
Sw eden USD-SEK 8.96 8.23 8.73 8.55 8.76 8.70 8.95 9.20 9.46 9.82
Norw ay USD-NOK 9.33 8.58 8.55 8.60 8.75 8.52 8.68 8.85 9.02 9.27
Sw itzerland USD-CHF 0.92 0.89 0.94 0.92 0.93 0.91 0.92 0.93 0.94 0.95
vs EUR x
US EUR-USD 1.17 1.22 1.17 1.19 1.16 1.15 1.14 1.13 1.12 1.10
UK EUR-GBP 0.91 0.89 0.85 0.86 0.86 0.86 0.86 0.86 0.85 0.85
Japan EUR-JPY 124 126 130 132 129 130 130 129 129 127
Canada EUR-CAD 1.56 1.55 1.47 1.47 1.47 1.44 1.44 1.44 1.42 1.41
Australia EUR-AUD 1.64 1.59 1.54 1.58 1.60 1.55 1.54 1.53 1.51 1.49
New Zealand EUR-NZD 1.77 1.70 1.68 1.70 1.68 1.60 1.61 1.61 1.62 1.62
Sw eden EUR-SEK 10.50 10.05 10.24 10.14 10.14 10.00 10.20 10.40 10.60 10.80
Norw ay EUR-NOK 10.94 10.48 10.03 10.20 10.13 9.80 9.90 10.00 10.10 10.20
Sw itzerland EUR-CHF 1.08 1.08 1.11 1.10 1.08 1.05 1.05 1.05 1.05 1.05
vs GBP x
US GBP-USD 1.29 1.37 1.38 1.38 1.35 1.34 1.33 1.32 1.31 1.30
Eurozone GBP-EUR 1.10 1.12 1.17 1.17 1.16 1.17 1.17 1.17 1.17 1.18
Japan GBP-JPY 136 141 153 154 150 151 152 150 151 150
Canada GBP-CAD 1.72 1.74 1.73 1.71 1.71 1.68 1.68 1.68 1.66 1.67
Australia GBP-AUD 1.80 1.78 1.81 1.84 1.87 1.81 1.80 1.78 1.77 1.76
New Zealand GBP-NZD 1.95 1.90 1.97 1.98 1.95 1.86 1.87 1.89 1.90 1.91
Sw eden GBP-SEK 11.57 11.24 12.03 11.83 11.81 11.65 11.91 12.15 12.40 12.77
Norw ay GBP-NOK 12.06 11.72 11.79 11.90 11.79 11.42 11.56 11.68 11.82 12.06
Sw itzerland GBP-CHF 1.19 1.21 1.30 1.28 1.26 1.22 1.23 1.23 1.23 1.24
Source: HSBC
44
November 2021
Asia Exchange Rates

end period 2020 2021 2022
vs USD x
Mainland China USD-CNY 6.79 6.53 6.55 6.46 6.44 6.40 6.40 6.45 6.50 6.55
Hong Kong USD-HKD 7.75 7.75 7.77 7.77 7.79 7.80 7.80 7.80 7.80 7.80
Taiw an USD-TWD 29.0 28.1 28.5 27.9 27.8 28.0 28.0 28.2 28.4 28.5
South Korea USD-KRW 1170 1087 1132 1126 1184 1180 1175 1170 1165 1160
India USD-INR 73.8 73.1 73.1 74.3 74.2 75.5 74.5 74.0 73.5 73.0
Indonesia USD-IDR 14880 14050 14525 14500 14313 14000 14000 14000 14100 14200
Malay sia USD-MYR 4.16 4.02 4.15 4.15 4.19 4.15 4.12 4.10 4.08 4.05
Philippines USD-PHP 48.5 48.0 48.5 48.8 51.0 50.0 50.0 50.5 51.0 52.0
Singapore USD-SGD 1.37 1.32 1.34 1.35 1.36 1.35 1.34 1.34 1.33 1.33
Thailand USD-THB 31.6 30.0 31.2 32.1 33.7 32.8 32.6 32.3 32.0 31.8
Vietnam USD-VND 23184 23098 23065 23008 22761 22525 22500 22600 22700 22800
vs EUR x
Mainland China EUR-CNY 7.96 7.97 7.69 7.66 7.46 7.36 7.30 7.29 7.28 7.21
Hong Kong EUR-HKD 9.08 9.47 9.12 9.21 9.02 8.97 8.89 8.81 8.74 8.58
Taiw an EUR-TWD 34.0 34.3 33.4 33.0 32.2 32.2 31.9 31.9 31.8 31.4
South Korea EUR-KRW 1372 1327 1328 1335 1371 1357 1340 1322 1305 1276
India EUR-INR 86.5 89.3 85.8 88.1 86.0 86.8 84.9 83.6 82.3 80.3
Indonesia EUR-IDR 17441 17163 17038 17194 16574 16100 15960 15820 15792 15620
Malay sia EUR-MYR 4.87 4.91 4.86 4.92 4.85 4.77 4.70 4.63 4.57 4.46
Philippines EUR-PHP 56.8 58.7 56.9 57.9 59.1 57.5 57.0 57.1 57.1 57.2
Singapore EUR-SGD 1.60 1.62 1.58 1.60 1.57 1.55 1.53 1.51 1.49 1.46
Thailand EUR-THB 37.0 36.6 36.6 38.0 39.0 37.7 37.2 36.5 35.8 35.0
Vietnam EUR-VND 27174 28217 27055 27283 26357 25904 25650 25538 25424 25080
vs GBP x
Mainland China GBP-CNY 8.78 8.92 9.03 8.93 8.69 8.58 8.52 8.51 8.52 8.52
Hong Kong GBP-HKD 10.02 10.59 10.71 10.74 10.49 10.45 10.38 10.30 10.22 10.15
Taiw an GBP-TWD 37.5 38.4 39.3 38.5 37.5 37.5 37.3 37.2 37.2 37.1
South Korea GBP-KRW 1512 1485 1560 1558 1596 1581 1564 1545 1526 1509
India GBP-INR 95.3 99.8 100.8 102.8 100.1 101.2 99.1 97.7 96.3 95.0
Indonesia GBP-IDR 19230 19199 20019 20057 19292 18760 18630 18482 18474 18472
Malay sia GBP-MYR 5.37 5.49 5.71 5.74 5.64 5.56 5.48 5.41 5.35 5.27
Philippines GBP-PHP 62.7 65.6 66.9 67.5 68.8 67.0 66.5 66.7 66.8 67.6
Singapore GBP-SGD 1.76 1.81 1.85 1.86 1.83 1.81 1.78 1.77 1.74 1.73
Thailand GBP-THB 40.8 40.9 43.1 44.3 45.4 44.0 43.4 42.6 41.9 41.4
Vietnam GBP-VND 29962 31563 31790 31826 30679 30184 29941 29835 29742 29660
Source: HSBC
45
November 2021
CEEMEA Exchange Rates

end period 2020 2021 2022
vs USD x
Czech Republic USD-CZK 23.1 21.5 22.3 21.5 21.9 22.1 21.9 22.0 22.2 22.6
Hungary USD-HUF 310 297 309 296 310 300 298 301 304 309
Poland USD-PLN 3.87 3.73 3.95 3.81 3.98 3.91 3.86 3.85 3.84 3.91
Romania USD-RON 4.16 3.98 4.19 4.16 4.27 4.35 4.39 4.42 4.46 4.55
Egy pt USD-EGP 15.74 15.74 15.73 15.67 15.73 16.00 16.10 16.25 16.25 16.25
Israel USD-ILS 3.43 3.21 3.34 3.26 3.22 3.20 3.15 3.10 3.00 3.00
Russia USD-RUB 77.7 74.0 75.7 73.1 72.7 70.0 68.0 65.0 65.0 65.0
Turkey USD-TRY 7.72 7.44 8.25 8.71 8.89 9.80 10.00 10.50 10.60 10.70
South Africa USD-ZAR 16.75 14.69 14.78 14.29 15.07 15.00 15.30 15.50 15.70 15.90
vs EUR x
Czech Republic EUR-CZK 27.1 26.2 26.1 25.5 25.3 25.4 25.0 24.9 24.9 24.9
Hungary EUR-HUF 364 363 362 351 359 345 340 340 340 340
Poland EUR-PLN 4.53 4.56 4.63 4.52 4.61 4.50 4.40 4.35 4.30 4.30
Romania EUR-RON 4.87 4.86 4.92 4.93 4.95 5.00 5.00 5.00 5.00 5.00
Egy pt EUR-EGP 18.45 19.23 18.45 18.59 18.21 18.40 18.35 18.36 18.20 17.88
Israel EUR-ILS 4.02 3.92 3.92 3.87 3.73 3.68 3.59 3.50 3.36 3.30
Russia EUR-RUB 91.0 90.4 88.7 86.7 84.2 80.5 77.5 73.5 72.8 71.5
Turkey EUR-TRY 9.04 9.09 9.68 10.33 10.30 11.27 11.40 11.87 11.87 11.77
South Africa EUR-ZAR 19.63 17.95 17.33 16.94 17.45 17.25 17.44 17.52 17.58 17.49
vs GBP x
Czech Republic GBP-CZK 29.9 29.4 30.7 29.8 29.5 29.6 29.2 29.1 29.1 29.4
Hungary GBP-HUF 401 406 425 410 418 402 397 397 398 402
Poland GBP-PLN 5.00 5.10 5.44 5.27 5.37 5.24 5.14 5.08 5.03 5.09
Romania GBP-RON 5.37 5.44 5.78 5.75 5.76 5.83 5.84 5.84 5.85 5.91
Egy pt GBP-EGP 20.34 21.51 21.68 21.68 21.20 21.44 21.42 21.45 21.29 21.14
Israel GBP-ILS 4.43 4.39 4.61 4.51 4.35 4.29 4.19 4.09 3.93 3.90
Russia GBP-RUB 100.4 101.2 104.3 101.2 98.1 93.8 90.5 85.8 85.2 84.6
Turkey GBP-TRY 9.97 10.17 11.37 12.04 11.99 13.13 13.31 13.86 13.89 13.92
South Africa GBP-ZAR 21.64 20.08 20.37 19.76 20.31 20.10 20.36 20.46 20.57 20.68
Source: HSBC
46
November 2021
LatAm Exchange Rates

end period 2020 2021 2022
vs USD x
Argentina USD-ARS 76.18 84.15 91.99 95.72 98.74 110.00 120.00 125.00 135.00 145.00
Brazil USD-BRL 5.61 5.19 5.63 4.97 5.44 5.60 5.70 5.80 5.80 5.70
Chile USD-CLP 784 711 719 734 810 800 810 820 830 840
Mex ico USD-MXN 22.11 19.91 20.43 19.94 20.64 20.00 20.25 20.50 20.75 21.00
Colombia USD-COP 3828 3428 3663 3752 3809 3850 3875 3900 3900 3900
Peru USD-PEN 3.60 3.62 3.74 3.87 4.13 4.00 4.00 3.95 3.90 3.90
Uruguay USD-UYU 42.54 42.24 44.22 43.61 42.91 43.50 43.50 43.00 43.00 42.75
vs EUR x
Argentina EUR-ARS 89.28 102.79 107.90 113.51 114.34 126.50 136.80 141.25 151.20 159.50
Brazil EUR-BRL 6.58 6.34 6.61 5.89 6.30 6.44 6.50 6.55 6.50 6.27
Chile EUR-CLP 919 868 843 871 938 920 923 927 930 924
Mex ico EUR-MXN 25.92 24.33 23.97 23.64 23.90 23.00 23.09 23.17 23.24 23.10
Colombia EUR-COP 4487 4188 4297 4450 4411 4428 4418 4407 4368 4290
Peru EUR-PEN 4.22 4.42 4.39 4.58 4.79 4.60 4.56 4.46 4.37 4.29
Uruguay EUR-UYU 49.86 51.60 51.86 51.71 49.68 50.03 49.59 48.59 48.16 47.03
vs GBP x
Argentina GBP-ARS 98.45 114.98 126.78 132.41 133.08 147.40 159.68 165.02 176.88 188.63
Brazil GBP-BRL 7.25 7.10 7.77 6.87 7.34 7.50 7.58 7.66 7.60 7.42
Chile GBP-CLP 1014 971 991 1016 1092 1072 1078 1083 1087 1093
Mex ico GBP-MXN 28.58 27.21 28.16 27.58 27.82 26.80 26.95 27.06 27.19 27.32
Colombia GBP-COP 4948 4685 5049 5190 5134 5159 5156 5148 5110 5073
Peru GBP-PEN 4.66 4.94 5.16 5.35 5.57 5.36 5.32 5.21 5.11 5.07
Uruguay GBP-UYU 54.97 57.72 60.94 60.32 57.83 58.29 57.89 56.77 56.34 55.61
Source: HSBC
47
November 2021
Notes
48
November 2021
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Paul Mackel, Daragh Maher, Clyde Wardle, Madan Reddy, Dominic
Bunning, Murat Toprak, Joey Chew, James Steel and Zoey Zhou
Important disclosures
Foreign exchange: Basis for financial analysis
This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the
clients of HSBC and is not for publication to other persons, whether through the press or by other means.
This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to
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Definitions for currency trades on DFs and NDFs

Buy: refers to buying the first currency in the named pair in exchange for the second currency in the named pair.
Sell: refers to selling the first currency in the named pair in exchange for the second currency in the named pair.
49
November 2021
The tenor of the instrument will be denoted and will refer to a settlement date relative to the opening date of the trade idea e.g.
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Additional disclosures
1 This report is dated as at 12 November 2021.
2 All market data included in this report are dated as at close 11 November 2021, unless a different date and/or a specific
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3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
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50
November 2021
Production & distribution disclosures

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51
November 2021
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起点财经，网罗天下报告

Currency Outlook: in The Dollar, We Trust

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Currency Outlook: in The Dollar, We Trust

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Currencies

In 2022, we still have trust in the

We outline the rationale behind our

Also in this report:

Thematic FX Trade ideas (pg 9)

Key Events for the DXY in 2021 (pg 11)

2022 Currency Outlooks (pg 13)

G10 (pg 13 – 21)

Asia (pg 22- 26)

CEEMEA (pg 27 – 30)

LatAm (pg 31 – 34)

Gold & Silver (pg 35 – 36)

In the Dollar, we trust

1) A moderation in global growth

2) The Fed’s gradual shift towards policy normalisation

Global growth - everything in moderation

6. Global trade (goods) volumes lost 7. Anti-cyclical currencies, including the

Nonetheless, an obvious concern is the persistent nature of bottlenecks that continue to

1.0 GBP SEK

Table 1. HSBC FX forecasts

Thematic FX trade ideas

Buy a bespoke SGD basket

Key events for the DXY year-to-date

9 Feb: USD relinquishes 18 June: Fed Bullard sees

2021 Currency Views

Asia (pg 22-26)

CEEMEA (pg 27-30)

LatAm (pg 31-34)

Gold & Silver (pg 35-36)

EUR: A long way to go

…and political risks

GBP: Over-promise, under-deliver

-25 -25 -12% -12%

JPY: Opposing forces – delayed

NZD: Flightless kiwi

1. Hawkish ammunition 2. Rates help, to a point

CAD: Challenges ahead

NOK: Running out of fuel

SEK: Doves dominate

2.0 2.0 0.8 0.8

0.0 0.0 -0.2 -0.2

SNB taking a slight breather

INR: The three P’s of positivity

IDR: A compelling story

KRW: Path of resistance

SGD: Green light

PLN: Back in pole position

1. The end of an ultra-loose monetary 2. The PLN could be strongly supported by

RUB: Realising its value

TRY: Lower rates, weaker FX

3. Interruption in current account improvement: We are also concerned by the potential

1. Real rate compression is TRY-negative 2. Increased dollarisation is a notable risk

-600 -600 100 100

ZAR: Battling the USD with buffers

Source: HSBC, Refinitiv, Bloomberg Source: HSBC, Refinitiv

BRL: Inflation and fiscal strains

MXN: Structural factors wane

CLP: Persistent fiscal risk premia

COP: Political and fiscal risks

Gold & Silver: Balancing act

James Steel Gold Outlook

Monetary and fiscal policies less supportive, firmer USD a negative

Silver is bouncing back