FX Compass: Looking For Signs of Pushback: Focus: Revising GBP Forecasts Higher

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES AND
ANALYST CERTIFICATIONS.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION

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FX Compass: Looking for
signs of pushback

FX Strategy

Long-dated US yields continue to respond more robustly to weak data than to
strong data: in FX as in other parts of fixed income, the net result is a
preference for carry-intensive currencies.
Against that backdrop, the innovation we highlight lies in the increased
policymaker resistance to currency appreciation, with selectiveness in picking
the right assets increasingly important in what are already mature trends. In this
context, we continue to prefer risk/reward in TRY.
Focus: Revising GBP forecasts higher
GBP remains one of the currencies with strongest exposure to a cyclical
recovery in the G10. In particular, it has positive exposure to the improvement in
euro area growth without the policy resistance to currency appreciation evident
from the ECB.
Although we do not expect the BoE Inflation Report to mark a change in policy
guidance, we do think the market is likely to continue to build in expectations of
a possible November start to a tightening cycle.
Given this, we are revising our EURGBP forecast lower to 0.7900. We are also
revising our 12m forecast to 0.75. As a result of these changes, our 3m
GBPUSD forecast is now 1.71 and our 12m forecast 1.76.
Trade Recommendations
We review our post-ECB trade recommendations for the subsequent break of
what our technical analysts view as important support in EURGBP. Implied vol
remains low but downside skew towards recent wides, hence we no longer
recommend risk/reversals. Instead, we would focus on limited downside or
leveraged downside exposures. For instance, we would consider:
3m EURGBP 0.80/0.78 put spreads, offering a maximum payout ratio of just
under 6.5x premium, and savings of approximately 30% versus the vanilla put.
3m EURGBP 0.79 digital put RKO 0.7650 for 9.5% of the EUR notional, which
offers cost savings of over one-third versus the vanilla digital put.
Elsewhere, we review the outlook for EURSEK and conclude that the April
inflation data are likely to extend the life of the range. We advocate waiting for
better levels to establish shorts versus NOK or GBP.
By contrast, we note that our economists' argument that a rate cut in Chile is a
clear possibility at this week's central bank meeting opens up the scope for an
immediately negative reaction in CLP in the wake the recent jump in inflation.

Research Analysts
Anezka Christovova
+44 20 7888 6635
anezka.christovova@credit-suisse.com

Matthew Derr
+1 212 538 2163
matthew.derr@credit-suisse.com

Ray Farris
+65 6212 3412
ray.farris@credit-suisse.com

Trang Thuy Le
+65 6212 4260
trangthuy.le@credit-suisse.com

Alvise Marino
+1 212 325 5911
alvise.marino@credit-suisse.com

Bill Papadakis
+44 20 7883 4351
bill.papadakis@credit-suisse.com

Bhaveer Shah
+44 20 7883 1449
bhaveer.shah@credit-suisse.com

Sean Shepley
+44 20 7888 1333
sean.shepley@credit-suisse.com

14 May 2014
Fixed Income Research
http://www.credit-suisse.com/researchandanalytics

14 May 2014
FX Compass: Looking for signs of pushback 2
In this issue:
Macro view: The path of least resistance 3
Weekly price action and positioning recap ................................ 6
GBP: Revising forecasts higher 8
SEK: Looking for better levels 11
Japan Portfolio Flow Update 14
Repatriation slows on better risk sentiment ............................. 14
GPIF Update: Changes likely in June ..................................... 14
Cash Portfolio Update 17
Derivative Portfolio Update 18
FX Forecast Summary 19

14 May 2014
Macro view: The path of least resistance
The lack of market response to recent surprises in US data suggests that investors bias
towards carry-based strategies in EM space likely remains intact for the time being. The
emergence of several instances of official resistance to FX strength, however, highlights
the need to be increasingly selective in pursuing carry strategies.
We think the path of least resistance for the long carry bias is to maintain exposure to
currencies with higher willingness and ability to tolerate FX strength. In this regards, we
think the Turkish lira offers the most attractive risk reward.
A remarkably unchanged backdrop
The lacklustre response of yields to US data continues to be a major driver of FX price
action. US 10-year yields are now trading more than 1 standard deviation rich to our rate
strategys team model, marking the largest absolute deviation from the model since
August 2011 (Exhibit 1). As a result, while the USD has recently rebounded off of the six-
months low established on a TWI basis last week, it is essentially trading unchanged on a
YTD basis (Exhibit 2).
The divergence from fair value is not only symptomatic of the current trading environment
but also a signal that risks in the carry trade are building. Increased selectiveness in
carry strategies is our recommendation.
Exhibit 1: US 10s are trading rich to our model Exhibit 2: The USD is de facto unchanged YTD
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
US 10s (%)
CS Modeled 10s
plus/minus 1 st dev

74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
Sep-13 Nov-13 Jan-14 Mar-14 May-14
USD TWI

Source: Credit Suisse, the BLOOMBERG PROFESSIONAL service Source: Credit Suisse, the BLOOMBERG PROFESSIONAL service
Resistance to USD weakness is rising
The prospect of a weak USD in a low global growth environment is starting to produce
more concerted policy responses from central bankers. The events of the past week
provide several notable examples.
FX strength was a key topic of the most recent ECB press conference. ECB President
Draghi's surprising commitment to some form of policy response in June against the
threat of sustained low inflation was clearly related to recent euro strength (see here).
The Central Bank of Brazil opted not to roll over a portion of its outstanding USD swaps,
becoming a de facto net USD buyer for the first time since February 2013.
In Colombia the central bank announced it is switching from a regulated amount of daily
USD purchases to intervening as necessary, likely in response to the surge in inflows
after the inclusion in the GBI EM bond index.
Alvise Marino
+1 212 325 5911
alvise.marino@credit-suisse.com

Sean Shepley
+44 20 7888 1333
Anezka Christovova
+44 20 7888 6635
Matthew Derr
+1 212 325 2000
matthew.derr@credit-suisse.com

Trang Thuy Le
+65 6212 24260
trangthuy.le@credit-suisse.com

Bhaveer Shah
+44 20 7883 1449

14 May 2014
More broadly, we note that Asian central banks FX reserves accumulation has gathered
pace again (Exhibit 3), with a notably more aggressive intervention dynamic in India in
recent months. We estimate that India's central bank has accumulated $14bn of FX
reserves alone in March and April and, probably another $4bn-$5bn more in May,
preventing USDINR from significantly undershooting 60.0.
Gauging tolerance to FX strength
Looking forward, in the absence of a near-term catalyst for USD upside we think episodes
such as the above will be more common. We also believe policymakers willingness to
tolerate FX strength will vary greatly. The issue is particularly relevant in the case of
emerging market currencies, where attractive carry metrics have generated broad
outperformance against the USD since the beginning of the year (Exhibit 4).
Exhibit 3: NJA FX reserve accumulation has spiked
Exhibit 4: Carry has been the key performance
driver in EM space
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-09 Feb-11 Apr-12 Jun-13
NJA ex Hong Kong FX reserves mom
growth (valuation adjusted), %

TRY
ZAR
CZK
HUF
PLN
MXN
BRL
CLP
COP
IDR
INR
KRW
PHP
SGD
THB
TWD
94
96
98
100
102
104
106
108
110
-0.50 -0.25 0.00 0.25 0.50 0.75 1.00
Y
T
D

t
o
t
a
l

r
e
t
u
r
n

i
n
d
e
x

(
0
1
/
0
1
/
1
4
=
1
0
0
)
12m risk-adjusted carry

Source: Credit Suisse, the BLOOMBERG PROFESSIONAL service Source: Credit Suisse
Assuming said carry dynamics are unlikely to change drastically in the near term, we try to
distinguish the currencies where additional USD weakness is likely to trigger policy
resistance from those which we think can continue to trade in line with the broader USD
dynamics. Our analysis focuses on recent developments in two key metrics, namely export
growth and monetary policy (Exhibit 5).
While the implications of recent export performance with regards to tolerance of FX
strength are relatively straightforward, drawing clear conclusions based on recent changes
in monetary policy is a more finicky affair.
Exhibit 5: Low export % and high carry likely imply low tolerance to FX strength
BRL
MXN
CLP
COP
CZK
HUF
PLN
ILS
RUB
ZAR
TRY
CNY
INR
IDR
KRW
MYR
PHP
SGD
TWD
THB
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
-15% -10% -5% 0% 5% 10% 15% 20%
3
m

n
o
m
i
a
l

r
a
t
e
Exports 3mma y/y %

Source: Credit Suisse, the BLOOMBERG PROFESSIONAL service
14 May 2014
We view the two as a distinction between willingness and ability to resist FX strength. The
recent export performance could be viewed as an metric for a countrys willingness to
resist FX strength. The backdrop of a still poor global growth outlook implies that countries
experiencing negative export growth might be more sensitive to currency appreciation
compared to one where exports are on a sharp rise.
The policy metric on the other hand is, in our view, a better metric of the countrys ability to
resist FX strength. Ceteris paribus, a country where the central bank has been in
tightening mode likely has more scope to ease, and therefore to resist FX strength,
compared to a country where monetary policy has been accommodative.
The fine print
The main caveat to this kind of analysis is that recent policy moves often underscore
idiosyncratic developments that are very specific to each country. A few highlights would
include the following.
Idiosyncratic non-economic factors have been major drivers behind recent policy
tightening efforts in Turkey and Russia. Domestic political stress in Turkey heading into
the March 2014 elections, as well as Russian President Putins threat to annex Crimea
weighed heavily on the lira and ruble in early March, forcing their central banks to act.
Both countries implemented significant tightening and put in place measures to limit
currency volatility at extraordinary meetings earlier this year. With political uncertainty
moderating for the time being, we think that both countries ability to push back on
unwanted currency strength has increased on the margin.
In Russia, while the ruble has found some stability in recent weeks, it is likely not yet at a
level that the central bank would consider worth containing and for further strength the
original intervention mechanism would regain relevance. A quick reversal of the surprise
50bp rate hike in late-April seems also unlikely. However, reduced exchange rate risks
may offer scope to relax domestic liquidity.
In Brazil, the central bank has welcomed a stronger BRL for the past two months, as
previously implemented monetary tightening had failed to undermine the primarily
supply-driven surge in inflation. With price pressures now surprising softer, activity data
underperforming, and still significant tightening priced in by local markets, we think
tolerance for FX strength has diminished sharply.
In India, although the RBI has been aggressive in capping INR appreciation to date, we
doubt they will intervene meaningfully against election-related flows. Exit polls on
Monday projected a strong victory for the BJP-led coalition National Democratic Alliance
(249-340 seats). The market has treated exit polls somewhat cautiously, but
expectations have probably shifted up from 240, pre polls. We see scope for INR to
extend gains towards 58-59 if final results this Friday match the lower end of the exit poll
projection and would not rule out a test of 57 in the event NDA obtains an absolute
majority. We previously mapped out a mild disappointment scenario which could lead to
a knee-jerk INR selloff if NDA wins only 200-220 seats (see India: Election scenarios
and market impacts). This range looks more likely to be 210-230 now.
Chile will be very much in play this week, with a rate decision on Thursday. Our
economists are calling for a 25bp cut, at odds with market consensus set for no change.
An outcome in line with our call would be consistent with a much weaker CLP and with
our generally bearish outlook for the peso. The recent sharp upside surprise to inflation
suggests that the central banks ability to tolerate FX strength might have diminished in
the near term, in the light of the previously implemented easing.
14 May 2014
Drawing conclusions
With little on the near-term horizon suggesting an imminent reversal in USD strength, we
think investors bias towards carry-based strategies in EM space will remain intact for the
time being. To the extent that this is triggering concerted policy responses, we think the
path of least resistance for the long carry bias is to add exposure to currencies with higher
willingness and ability to tolerate FX strength.
In this regards, we think the Turkish lira offers the most attractive risk reward. We
also expect to see more aggressive pushback against FX appreciation in Brazil.
Finally, as noted in our recent review of ECB policy, we note that the prospect of ECB
easing, or at least the likely increase in market pricing of a more accommodative policy
profile encourages an extension of capital into EM currencies that were already
recovering. Amongst these, we note the Turkish lira still offers very attractive carry levels.
Exhibit 6: Long TRY remains our favorite pro-carry strategy
12m risk adjusted forward implied carry
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
C
Z
K
T
W
D
I
L
S
T
H
B
C
L
P
H
U
F
P
H
P
P
L
N
M
X
N
S
G
D
I
N
R
I
D
R
C
O
P
Z
A
R
K
R
W
M
Y
R
R
U
B
T
R
Y
B
R
L


Weekly price action and positioning recap
USD TWI was broadly stronger against G10, but softer against EM on the week. CLP
continued its recent string of outperformance, while EUR and CHF lost ground. On a YTD
basis, AUD and NZD continue to lead among G10, while BRL has outperformed among
EM pairs.
Aggregate speculative positioning in the USD continued to hold relatively steady, with the
small net short extending 2pp to 6% of open interest. The largest movements on the week
came in specs JPY short, which contracted 11pp to be worth 62% as a share of OI, while
specs cut their net long in CHF by 10pp to 26% of OI. Specs net long in the GBP
continues to come off of recent extremes, while the NZD net long continues to extend and
is towards the upper end of the historical range.
14 May 2014
Exhibit 7: Current positioning versus the prior week
Exhibit 8: Current positioning versus range since
January 2010
Net Speculative Positions as a % of Open Interest Net Speculative Positions as a % of Open Interest
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
JPY CAD RUB USD AUD EUR CHF GBP MXN NZD
4/29/14
5/6/14

-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
JPY CAD RUB USD AUD EUR CHF GBP MXN NZD
Range Since Jan 2010
5/6/14

Source: Credit Suisse, CFTC Source: Credit Suisse, CFTC

Exhibit 9: G10 five-day spot returns Exhibit 10: G10 2014 spot returns
Percentage change versus USD Percentage change versus USD
CHF
EUR
NZD
GBP
SEK
JPY
CAD
NOK
AUD
USD TWI
-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0%

CAD
SEK
EUR
USD TWI
CHF
GBP
NOK
JPY
AUD
NZD
-4% -2% 0% 2% 4% 6%

Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse

Exhibit 11: EM five-day spot returns Exhibit 12: EM 2014 spot returns
Percentage change versus USD Percentage change versus USD
CZK
PLN
THB
HUF
SGD
TWD
ILS
CNY
COP
KRW
MYR
BRL
MXN
INR
TRY
PHP
ZAR
RUB
CLP
-2.0% 0.0% 2.0% 4.0%

RUB
CLP
CNY
HUF
TWD
PLN
CZK
COP
THB
ILS
SGD
MXN
PHP
MYR
ZAR
KRW
TRY
INR
BRL
-10% -5% 0% 5% 10%

Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse

14 May 2014
GBP: Revising forecasts higher
GBP remains one of the currencies with strongest exposure to a cyclical recovery in
the G10.
In particular, it has positive exposure to the improvement in euro area growth without the
policy resistance to currency appreciation evident from the ECB.
Our preferred rates market indicators point to the strongest potential for policy
divergence between the UK and the euro area seen since the start of EMU.
Despite our expectation that the BOE's guidance will remain for a slow path of
tightening towards a lower terminal rate than in previous cycles, we think the market
will continue to build in expectations of a possible November start to a tightening cycle
by the Bank of England.
Given this, with EURGBP having fallen in line with our 3m forecast of 0.8150, we are
revising our forecast lower to 0.7900. We are also revising our 12m forecast to 0.75.
As a result of these changes, our 3m GBPUSD forecast is now 1.71 and our 12m
forecast 1.76.
Our downward revision to our EURGBP forecast is consistent with our technical
analysts' view of a decline towards 0.7800 following the recent break below 0.8150.
Risks to the view:
o Positioning has built to reflect the strength of the UK recovery, both in rates and FX.
o The Financial Policy Committee meeting in June may seek to implement macro-
prudential controls on mortgage lending through a higher hurdle on mortgage
payment affordability.
o The UK's current account deficit is historically elevated and requires financing
through short-term capital flows.
o The market prices for very limited risk associated with the Scottish referendum vote
and may be increasingly sensitive to headline-induced de-positioning as the vote
approaches.
Exhibits 13 - 14 provide two indicators of the extent to which the interest rate options
market prices for divergence between UK and euro area rates.
Exhibit 13 shows the ratio of implied volatility for 6m options on different rate tenors. The
divergence in expected volatility on 2yr and 5yr rates is at its most extreme since the start
of EMU.
Exhibit 14 complements this picture by highlighting a measure we use to show how quickly
the market prices for policy to exert a normal impact on the yield curve compared with the
highly abnormal influence it has had in the period of strong policy guidance. On this
measure, which has correlated more closely with EURGBP than interest rate spreads
themselves in the last two years, the difference between UK and euro area rates is at its
most extreme.
Sean Shepley
+44 20 7888 1333

14 May 2014
Exhibit 13: GBP / EUR rate vol differentials are
extreme
Exhibit 14: Reflecting a market expectation of rapid
GBP rate normalisation
31-Dec-99 30-Dec-04 30-Dec-09
1.0
1.5
2.0
GBP / EUR vol ratios
2s 5s 10s 30s

31-Dec-11 30-Dec-12 30-Dec-13
-0.50
-0.25
0.00
0.25
0.800
0.825
0.850
0.875
0.900
2s10s vol ratio term structure versus EURGBP
GBP - EUR 2s10s vol term structure EURGBP FX, RHS

Source: Credit Suisse Locus Source: Credit Suisse
The more balanced contributions to UK growth shown in Exhibit 15 provide increasing
comfort that the rapid tightening in the labour market is likely to be sustained. As such, we
do not believe that any macro-prudential measures targeting the housing market will
disrupt the recovery or indeed act as a substitute for higher interest rates. By contrast, we
are mindful of the increase in long GBP exposure and view this as a factor that will tend to
slow the pace of GBP appreciation.
Exhibit 15: Balanced contributions to growth
suggests macro-prudential measures will not
substitute for higher rates

Exhibit 16: Positioning via GBP longs is now
elevated
Net GBP positioning as a percentage of total open interest

-100%
-60%
-20%
20%
60%
100%
2010 2011 2012 2013 2014

Source: Credit Suisse Locus Source: Credit Suisse
Review of recent GBP trade recommendations
In our analysis of the implications from last weeks ECB meeting, we advocated getting
into EURGBP-lower structures, as positions that are likely to benefit from the combination
of the pro-growth characteristics of ECB stimulus and the associated euro weakness that
the possibility of negative rates could bring about, while at the same time standing to make
further gains if the tightening UK labour market gets recognized by the BoE in its
upcoming Inflation Report this week.
14 May 2014
With EURGBP spot having dropped from by about 0.7% to 0.8140 since publication, and
3m implieds having picked up somewhat to 5.675%, the mark-to-market value of the
trades recommended last week has by now increased. Re-pricing indicatively the three
EURGBP options structures recommended last week off current spot and vol levels we
observe the following moves:
The 3m short 0.8450 call vs. long 0.79 put risk/reversal that was offered at
approximately zero cost now costs approximately 0.17%.
The 3m 0.79 digital put now costs approximately 14.3% of EUR notional (up from 10%).
The 3m 0.80 / 0.78 put spread now costs about 0.40% (up from 0.30%).
With the key levels highlighted by our technical analysts having been taken out in the price
action of the past couple of days, we now see a clearer path for the exchange rate to
make a significant break lower and we continue to favour EURGBP downside exposure.
However, we would be less inclined to sell calls in order to finance the purchase of puts at
these levels, given the increased downside skew (while the level of vol remains low) and
the possibility of any bounce-back after the recent sharp move lower that could result in
MTM losses.
We would also consider ways of cheapening the purchase of digi put, given the increase in
the cost of the recommended structures.
As a way to cheapen the digital put, we would consider purchasing a 3m EURGBP
0.79 digi put RKO 0.7650 for 9.5% of the EUR notional, which offers cost savings of
over one-third vs. the vanilla digi, and a maximum payout ratio of just over 10x premium.
We find the risk/reward in buying 3m EURGBP 0.80/0.78 put spreads still
attractive, offering a maximum payout ratio of just under 6.5x premium, and savings of
approximately 30% versus the vanilla 0.80 put premium.
The risk to both trades is limited to premium paid.

14 May 2014
SEK: Looking for better levels
With a clear deflationary pressure and a need to ease, but not aggressive enough central
bank and favorable flow, the outlook for Swedish krona has proven rather difficult.
For the immediate horizon we prefer to keep a tactical range-trade outlook. From these
levels, that implies EURSEK could retrace further towards 8.85-8.90 levels and we
would be inclined to trade specific data risk.
But we keep a longer-term bearish view and SEK retrace may offer a clearer structural
trading opportunity. This would be most relevant against GBP or NOK, rather than EUR,
given the risk of ECB easing.
In terms of forecasts, we see EURSEK at 9.00 in three months and 9.20 in 12 months.
Exhibit 17: A range in the near term
8.7
8.8
8.9
9.0
9.1
9.2
Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14
EURSEK

The latest data suggest some further retrace potential
The April inflation print was unfortunately not decisive enough to leave the market happy
with SEK shorts. CPI is now in line with Riksbanks April projections and CPIF is only
0.1%pp below, reducing to a large extent the negative surprise in the previous release. So,
the deflationary trade is on hold for a few weeks.
Until the next inflation release (on June 12), it may be growth data and potentially flow
support which could dominate. Given the low levels of the data surprise and the strong
current account surplus combined with potential Volkswagen/Scania deal related flow,
SEK could gain. In particular, we would think releases such as industrial production,
manufacturing confidence and exports offer some rebound scope, but there is no
economist consensus for these yet.
Anezka Christovova
+44 20 7888 6635

14 May 2014
Exhibit 18: Some scope for data (particularly
growth) to start surprising positively Exhibit 19: Fundamental flow support is strong
-120
-90
-60
-30
0
30
60
90
120
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Economic Surprise Index - SEK
+ / - 1.65 st dev

0
10
20
30
40
50
60
70
80
Jan-05 Jul-07 Jan-10 Jul-12
CA, quarterly, sa,
SEKbn
Trade, quarterly,
sa, SEKbn
Scania inflow potenially
the size of the quarterly CA
surplus

Source: Credit Suisse, the BLOOMBERG PROFESSIONAL service, Citigroup surprise
index
Source: Credit Suisse, Thomson Reuters Datastream
But the structural story is all about the deflationary pressure
The inflation behavior is to some degree a puzzle even for the Riksbank, as discussions
on the board indicate. Perhaps hardest to fathom is the low service inflation given higher
unit labour costs and relatively stronger household consumption (see the detailed review
in the last Monetary Policy Report, here). Meanwhile, the low goods inflation makes more
sense given imported pressures, too low external demand environment and
underperforming exports. But either way, the inflation is too low and the Riksbank is
increasingly acknowledging it needs to do something about it.
Exhibit 20: Inflation clearly underperforming peers
(not to mention the target)
Exhibit 21: Market pricing in a much lower path than
Riksbank, but only 12bps of easing by end-Sep
-1
0
1
2
3
4
5
6
Jan-05 Aug-06 Mar-08 Oct-09 May-11 Dec-12
SEK CPIF
NOK CPI
Germany HICP
EUR HICP

0.25
0.75
1.25
1.75
2.25
Jan-14 Nov-14 Sep-15
Riksbank rate
projection
Market pricing

Rate spreads should continue to move against SEK
Over the next few months, Riksbank would probably provide the key innovation to rate
spreads. A 25bps cut in July appears quite likely now given some progress with macro-
prudential measures and the clear recognition on the Board of an urgency to act on
inflation. Only about 12bps of that is priced in which compares to most of the expected
ECB cut already being reflected in eonia forwards.
14 May 2014
However, further out Riksbank may be stuck with lower rates for longer, while other
banks may provide more of the innovation by shifting hawkish a lot faster. Such a
divergence seems most appropriate for GBP and potentially also NOK, which would be
our favored expressions.
Exhibit 22: GBPSEK rate spreads are likely to move
higher
Exhibit 23: NOKSEK already lagging rate
differentials
9.00
10.00
11.00
12.00
13.00
14.00
15.00
-200
-150
-100
-50
0
50
100
150
200
250
300
Dec-04 Dec-07 Dec-10 Dec-13
GBPSEK 2y swap spread, bps
GBPSEK (RHS)

1.00
1.05
1.10
1.15
1.20
1.25
1.30
-100
-50
0
50
100
150
200
250
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
NOKSEK 2y swap spread, bps
NOKSEK (RHS)

14 May 2014
Japan Portfolio Flow Update
For the full report, which includes currency position and breakdown of the flows by
investor type, see here.
Repatriation slows on better risk sentiment
Japanese residents flows were about flat in April following strong repatriation in the
previous four months. We suspect the rebound in risk appetite and the better EM carry
environment helped, together with potentially some residual rebalancing motives.
Institutional composition: All categories except banks bought foreign assets in April.
In particular, investment trusts outflows amounted to 336bn compared to 93bn
repatriation in March, with this segment most suggestive of the risk appetite impact.
Pension funds also returned to foreign buying and lifers saw the highest monthly foreign
investment in 12 months.
Currency composition: The data on the currency composition are only available for
March, and hence do not capture the better carry environment. In G10, EUR saw sizeable
outflows and decrease in allocation, while the USD and AUD benefited from inflows. In
EM, EMEA and notably RUB suffered on increased geopolitical tension, while Asia
benefited from inflows.
Exhibit 24: Currency composition data showed EUR
outflows, whereas AUD continues to be bought
Exhibit 25: All categories except banks showed
outflows in April
100bn, positive number is portfolio outflow from Japan to abroad 100bn, positive number is portfolio outflow from Japan to abroad
0
20
40
60
80
100
120
140
160
180
200
0
100
200
300
400
500
600
Jan-05 Jul-06 Jan-08 Jul-09 Jan-11 Jul-12 Jan-14
T
h
o
u
s
a
n
d
s
USD cumulative flow
EUR cumulative flow (rhs)
AUD cumulative flow (rhs)

-40
-30
-20
-10
0
10
20
30
40
50
J
u
l
-
1
1
O
c
t
-
1
1
J
a
n
-
1
2
A
p
r
-
1
2
J
u
l
-
1
2
O
c
t
-
1
2
J
a
n
-
1
3
A
p
r
-
1
3
J
u
l
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
A
p
r
-
1
4
Investment trusts Life ins.
Trust accounts Banks
Other Total

Source: Credit Suisse, Japan Ministry of Finance Source: Credit Suisse, Japan Ministry of Finance

GPIF Update: Changes likely in June
Further GPIF developments are likely to be announced around mid-June, in our view, near
the expected time of the Abe administrations new growth strategy.
The review should further align GPIF strategy with the recommendation from the final
report of the Panel of Sophisticating the Management of Public Funds, published in
November. The original time frame proposed to decide on a new policy asset mix was
within about one year (see Exhibit 14).
Recent changes already seem to have followed the recommendations that had been
planned to be addressed in the near term (see Exhibit 26). For instance, the Chairman
and Deputy Chairman of the GPIF Investment Committee were appointed in April both
of whom were expert members of the Advisory Panel and appear supportive of
Anezka Christovova
+44 20 7888 6635
Bhaveer Shah
+44 20 7883 1449

14 May 2014
decreasing the funds allocation to domestic bonds. Additionally, two changes
announced in April increase the focus on higher yielding instruments. First, more
aggressive benchmark indices would be used to yardstick passive investments (such as
the ROE-focused JPX Nikkei 400). Second, a new smart beta category was created
within active investments.
Exhibit 26: Roadmap for reforms as outlined in the Nov 2013 GPIF report
Based upon Annex 2 from: http://www.cas.go.jp/jp/seisaku/koutekisikin_unyourisk/pdf/e_final_report.pdf
Issues to be addressed
immediately
Issues to be addressed in about
one year
Goal to be
achieved
Revise investments within the
current policy asset mix
Decide on new policy asset mix
Consider investment return targets
Invest in new types of assets
(mainly liquid assets)
Consider new benchmarks in
passive investments
Establish baby funds
Introduce incentive fees base on
mid-long term performance of
outside portfolio managers
Make investment committee
membership a full-time position
following a relaxation on
limitations for wages, employees,
costs
Consider securing leading experts Hire leading experts
Governance
structure
reform
Investment
reform
Invest in new types
of assets including
illiquid assets
Establish a
governing body
and fund
management
system with a high
level of expertise

Source: Credit Suisse
The FX impact of the GPIF review would most crucially depend on shifts in asset
allocations. Allocation limits will likely lean away from domestic bonds to higher return
assets, in our view, but there is uncertainty as to the degree of the shift and how much of
assets would be directed abroad or stay domestic.
The latest figures (slightly outdated, as of December 2013) showed domestic bond
allocations at 55%. We expect this to fall given the high international comparison and
low return of JGBs, though only a 3% further reduction is permitted under the current
60% +/-8% limit.
Domestic equity allocations on the other hand are already at 17%, close to the upper
range of the current 12% +/-6% target, and we expect the target to rise given the
Abenomics administrations suggestions for using GPIF as a vehicle to support domestic
stocks. Similarly, the 15% allocation within foreign stocks is at the high end of the 12%
+/-5% target.
However foreign bonds are at 11%, only at the middle of the current 11% +/-5% target.
Exhibit 27 shows the actual allocations of GPIF with the fund's current target allowances.
The international comparisons show GPIF's current domestic bond allocation is
considerably high.

14 May 2014
Exhibit 27: GPIF allocations, targets, and international comparison
Replicated from: http://www.cas.go.jp/jp/seisaku/koutekisikin_unyourisk/pdf/e_final_report.pdf
Actual allocations sourced from: http://www.gpif.go.jp/en/fund/
Q2 13 Q3 13 Q4 13
Japan
(GPIF)
USA
(Cal Pers)
Canada
(CPPIB)
Norway
(GPFG)
Netherlands
(ABP)
Sweden
(AP 1-40)
Domestic bonds 59.9% 58.0% 55.2% 60% (+/- 8%) 30%
Foreign bonds 10.0% 10.1% 10.6% 11% (+/- 5%) 5%
Domestic
equities
15.7% 16.3% 17.2% 12% (+/- 6%) 10%
Foreign equities 12.9% 13.5% 15.2% 12% (+/- 5%) 55%
Other 5% 0-5% 30% 11-17%
31%
36-39%
46-53%
International comparison of target allocations
17%
64%
35-40%
60%
39%
Actual realised

Source: Credit Suisse, GPIF, the BLOOMBERG PROFESSIONAL service

14 May 2014
Cash Portfolio Update
Exhibit 28: Positions in cash recommendations portfolio
No changes this week

Date Opened Trade Details Notional Units Spot Reference Forward Take Profit Spot Loss %Gain P&L in USD
11-Mar-14 Short EURPLN 1 4.22 4.24 4.10 4.26 1.24% 123,746

Closed Positions
Date opened Closed positions Notional units Reason closed Date closed Fwd at open Fwd at Close % Gain P&L in USD
12-Nov-13 Long USDTRY 1 Hit target 07/01/14 2.0918 2.1803 4.06% 405,880
07-Jan-14 Short CLPCOP 1 Stop loss 30/01/14 3.6190 3.6697 -1.34% (133,764)
09-Oct-13 Long GBPNOK 1 Closed 11/02/14 9.6502 10.0917 4.52% 451,614
05-Nov-13 Long GBPSEK 1 Closed 11/02/14 10.4916 10.6034 1.08% 108,180
21-Jan-14 Short AUDUSD 1 Closed 11/02/14 0.8747 0.9001 -2.82% (281,800)
25-Sep-13 Long USDPHP 3m NDF 1 Closed 11/02/14 43.0000 44.9370 4.31% 431,048
07-Jan-14 Long USDTHB 1 Stop loss 14/02/14 33.4911 32.4546 -3.19% (319,369)
04-Dec-13 Long INRIDR 1 Stop loss 17/02/14 192.6400 186.8127 -3.13% (312,931)
11-Mar-14 Long COPBRL 1 Stop loss 08/04/14 0.1146 0.1136 -0.93% (93,125)
16-Apr-14 Long SGD basket
(*spot refs based on
USDSGD)
1 Closed

16/04/14

1.2691 1.2531 0.67% 67,161
11-Mar-14 Long PLNHUF 1 Stop loss 01/05/14 74.1274 72.8969 -1.70% (170,016)
Unrealised P&L: 123,746
Realized P&L: 152,876
Total P&L 2014: 276,622
Hit Rate: 50%
Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.
Information, opinions and estimates contained in this report reflect a judgment at the original date of publication by CS and are subject to change without notice. The price, value of and income
from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments may be subject to exchange rate fluctuation
that may have a positive or adverse effect on the price or income of such securities or financial instruments. The P&L results shown do not include relevant costs, such as commissions, interest
charges, or other applicable expenses. (*) Spot ref based on USDSGD.

14 May 2014
Derivative Portfolio Update
Exhibit 29: Positions in derivative recommendations portfolio
The long 2m USDRUB RKO call expired, losing the 0.42% premium paid.
Date Opened Trade Details Entry Cost Current Value
P&L
(as % of Notional)
Notional
(in USD)
P&L
(in USD)
6-May-14 Buy 1m EURUSD call 0.33% 0.03% -0.30% 100,000,000 -295,149
23-Apr-14 Buy 2m 1x1 USDMYR RKI call spread 0.28% 0.07% -0.21% 100,000,000 -210,000
23-Apr-14 Buy 2m 1x1.5 USDBRL call spread 0.77% 0.29% -0.49% 100,000,000 -485,000
23-Apr-14 Buy 2m 1x1.5 USDCLP call spread 0.65% 0.21% -0.44% 100,000,000 -440,000
23-Apr-14 Buy 3m 1x2x1 AUDUSD RKI put butterfly 0.35% 0.22% -0.13% 100,000,000 -131,035
23-Apr-14 Buy 6w USDJPY RKO call 0.30% 0.23% -0.07% 100,000,000 -70,000
8-Apr-14 Buy 3m USDCNH put 0.30% 0.05% -0.26% 100,000,000 -255,000
8-Apr-14 Buy 2m USDCAD 1x1.5 put spread 0.49% 0.44% -0.05% 100,000,000 -50,000
25-Mar-14 Buy 3m AUDCAD RKO digital put 10.00% 8.20% -1.80% 1,000,000 -18,386
14-Jan-14 Buy 6m AUDNZD digital put 12.50% 1.32% -11.19% 1,000,000 -116,782
26-Nov-13 Buy 1y USDBRL seagull 0.30% -1.43% -1.73% 100,000,000 -1,730,000
26-Nov-13 Buy 1y1y USDRUB FVA 12.00% 14.43% 2.43% 10,000 24,250
9-Apr-13 Buy 2y USDJPY call 1.83% 0.11% -1.73% 100,000,000 -1,725,000
9-Apr-13 Buy 2y zero cost USDJPY RKI risk reversal 0.00% -0.01% -0.01% 100,000,000 -12,500
6-May-14 Buy 1m EURUSD call 0.33% 0.03% -0.30% 100,000,000 -295,149

Closed Positions
Date Closed Trade Details Entry Cost Date Opened
P&L
(as % of Notional)
Notional
(in USD)
P&L
(in USD)
9-May-14 Buy 2m USDRUB RKO call 0.42% 10-Mar-14 -0.42% 100,000,000 -420,000
4-May-14 Buy 3m USDJPY RKI risk reversal 0.11% 4-Feb-14 -0.27% 100,000,000 -110,000
18-Apr-14 Buy 2m USDRUB 1x1.5 call spread 0.44% 18-Feb-14 -0.44% 100,000,000 -440,000
14-Apr-14 Buy 3m EURGBP 1x1.5 RKI put spread 0.38% 14-Jan-14 -0.38% 100,000,000 -383,409
8-Apr-14 Buy 3m AUDUSD RKO digital put 11.00% 11-Mar-14 -8.25% 1,000,000 -85,913
8-Apr-14 Buy 6m AUDUSD digital put 15.00% 23-Oct-13 -13.40% 1,000,000 -130,202
8-Apr-14 Buy 6m USDCAD seagull 0.41% 14-Jan-14 -0.41% 100,000,000 -405,000
8-Apr-14 Buy 3m USDCAD RKO call 0.24% 11-Feb-14 -0.05% 100,000,000 -52,000
8-Apr-14 Sell 2m USDCAD call, buy 1y Canadian OIS 0.53% 11-Mar-14 -0.03% 100,000,000 -34,567
8-Apr-14 Buy 3m USDZAR KI call 1.40% 10-Mar-14 -0.47% 100,000,000 -470,000
8-Apr-14 Buy 6m USDZAR 1x1.5 call spread 0.20% 21-Jan-14 0.17% 100,000,000 170,000
4-Apr-14 Buy 2m EURUSD 1x1 put spread 0.36% 4-Feb-14 -0.36% 100,000,000 -364,884
18-Mar-14 Buy 1m EURGBP RKO put 0.20% 18-Feb-14 -0.20% 100,000,000 -202,085
18-Mar-14 Buy 3m CADMXN RKO put 0.35% 19-Dec-13 -0.29% 100,000,000 -281,953
30-Jan-14 Buy 3m CADMXN 1x2 put spread 0.64% 30-Oct-13 2.01% 100,000,000 1,887,003
3-Feb-14 Buy 2m USDRUB 1x1.5 call spread 0.26% 3-Dec-13 0.10% 100,000,000 97,617
27-Jan-14 Buy 3m USDTRY RKO call 0.41% 7-Jan-14 -0.41% 100,000,000 -410,000
26-Jan-14 Buy 2m USDJPY call 0.45% 26-Nov-13 -0.45% 100,000,000 -450,000
21-Jan-14 Buy 2m USDZAR RKO call 0.60% 17-Dec-13 0.55% 100,000,000 548,750
16-Jan-14 Buy 2m USDTRY RKO call 0.45% 17-Dec-13 -0.45% 100,000,000 -450,000
20-Jan-14 Buy 1m USDSGD call 0.23% 17-Dec-13 0.26% 100,000,000 260,000
Please see the Structured Securities, Derivatives, and Options Disclaimer.
Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.
Information, opinions and estimates contained in this report reflect a judgment at the original date of publication by CS and are subject to change without notice. The price, value of and income
from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments may be subject to exchange rate fluctuation
that may have a positive or adverse effect on the price or income of such securities or financial instruments. The P&L results shown do not include relevant costs, such as commissions, interest
charges, or other applicable expenses.
14 May 2014
FX Forecast Summary
Major Currencies
1
vs.
Spot

Forecasts
3m 12m
US Dollar TWI 86.00 87.51 93.60 Bullish. As the Fed continues to taper, we expect many EM currencies to
remain under pressure, as excesses of the unprecedented period of record
low US interest rates begin to reveal themselves.

by market convention EUR 1.389 1.360 1.320
JPY 101.7 106.0 120.0
GBP 1.695 1.722 1.760
CHF 0.877 0.904 0.924
AUD 0.939 0.910 0.820
CAD 1.087 1.080 1.160
SEK 6.508 6.618 7.045
Euro TWI 97.1 95.8 95.38 Moderately bearish. The ECBs dovish rhetoric on potential QE will likely
make the euro sensitive to data and ECB comments, but implementation
faces barriers. EURUSD prospects will be determined by the evolution of
short-term real interest rate differentials and flow-based factors, where we
see scope for the euro support to diminish a little.
foreign currency units per
euro
USD 1.389 1.360 1.320
JPY 141.2 144.2 158.4
GBP 0.819 0.790 0.750
CHF 1.218 1.230 1.220
AUD 1.480 1.495 1.610
CAD 1.510 1.469 1.531
SEK 9.039 9.000 9.300
Japanese Yen TWI 136.5 131.8 118.1 Bearish. In the next month or so, lower US yields in response to the slowing
in the US are likely to keep USDJPY languishing around 102. However, we
expect the US economy and yields to bounce up in the late spring. The
ongoing deterioration in Japan's current account deficit, combined with our
outlook for US yields to rise later this year, should keep USDJPY trending
slightly higher.
yen per unit foreign
currency
USD 101.7 106.0 120.0
EUR 141.2 144.2 158.4
GBP 172.4 182.5 211.2
CHF 115.95 117.20 129.84
AUD 95.44 96.46 98.40
CAD 93.5 98.1 103.45
SEK 15.63 16.02 17.03
UK Sterling TWI 86.32 89.31 94.53 Bullish. Data remain strong and market expectations for the BoE to hike
continue to be bought forward. Expectations for divergence between
Eurozone and UK rates are at historic highs. However high positioning is a
risk to this view, particularly as the Scottish referendum approaches.
Whilst housing concerns remain we do not expect any macroprudential
measures from the FPC to have a significant negative impact on GBP.
foreign currency units per
pound
USD 1.695 1.722 1.760
EUR 1.221 1.266 1.333
JPY 172.4 182.5 211.2
CHF 1.487 1.557 1.627
AUD 1.806 1.892 2.146
CAD 1.843 1.859 2.042
SEK 11.03 11.39 12.40
Swiss Franc TWI 146.9 144.9 146.2 Neutral to bearish. EURCHF looks set to remain near-term range-bound as
Switzerlands superior growth prospects are counterbalanced by the SNBs
continued dovish focus on the 1.20 floor given low inflation, while other
bilaterals look set to rise. Risks relate to the potential unwinding of crisis-
related flows and CHF becoming a funding currency.
francs per unit foreign
currency (per 100 units
for JPY and SEK)
USD 0.877 0.904 0.924
EUR 1.218 1.230 1.220
JPY 0.862 0.853 0.770
GBP 1.487 1.557 1.627
AUD 0.823 0.823 0.758
CAD 0.807 0.837 0.797
SEK 13.48 13.67 13.12

1
Major currencies, defined and ranked by order of their reported foreign exchange market turnover from the BIS 2004 Triennial
Central Bank Survey.
14 May 2014
Regional Currencies vs.
Spot
Forecasts
Comments 3m 12m
Americas

Brazilian Real USD 2.210 2.400 2.580
Bearish. The deterioration in fiscal accounts exposes credit to a downgrade
risk. Furthermore, BRL remains vulnerable to Fed tapering, and political risk
should rise ahead of the October election. Limited easing from the Chinese
authorities and an unimpressive recovery from Europe should also hurt exports.

Canadian Dollar TWI 104.1 105.2 99.0
Bearish. We think the Bank of Canada will turn more dovish in H1. In the
absence of offsetting flows from reserve manager demand, we think this will
help push the CAD towards a less expensive valuation level.
USD 1.087 1.080 1.160

Mexican Peso USD 12.95 13.50 13.00
Long-Term Bullish. The recent stream of negative growth surprises in Mexico
reinforces our bias for a weak peso in the near term, with limited impact on
MXN's long-term prospects. In the aftermath of the ambitious reform agenda of
late 2013, the focus has shifted to the softer tone emerging from recent data.

Colombian Peso USD 1905 1875 1955
Bullish. The peso will prove relatively resilient in a rising US yield environment.
Alongside stronger domestic fundamentals, portfolio inflows should continue giving
support. Monetary policy tightening expectations have also shifted earlier.

Chilean Peso USD 555.9 570.0 575.0
Bearish. We remain of the view that monetary accommodation and an
extended slowdown in mining FDI will weigh on CLP in coming months.

Pacific

Australian Dollar USD* 0.939 0.910 0.820
Long-term bearish. The RBA seems likely to turn more dovish after the Q2
inflation print, with declining yield spreads and falling commodity prices
pulling AUD down further out.
JPY* 95.44 96.46 98.40
NZD* 1.085 1.060 1.020
NZ Dollar USD* 0.865 0.858 0.804
Mixed. We expect NZD to outperform AUD but to lose ground against USD in a
broad USD strength environment. We look for monetary and economic
divergence between Australia and New Zealand to continue driving AUDNZD
lower in 2014.
JPY* 87.94 91.00 96.47
Scandinavia
Swedish Krona EUR 9.039 9.000 9.300
Bearish. The latest inflation data have been slightly better than expected and
should keep SEK trading range bound for the near term. In the longer term,
weak underlying price pressures and rate spreads should work against SEK.
USD 6.508 6.618 7.045
Norwegian Krone EUR 8.162 8.050 8.450
Long term bearish. Data have improved, with house prices surging, lending
rates falling, stronger business surveys and looser fiscal policy. Yet despite
the upbeat short term outlook, deeper long term structural issues still remain.
USD 5.876 5.919 6.402
SEK* 1.107 1.118 1.101
Emerging Europe, Middle East and Africa
Czech Koruna EUR 27.40 27.30 27.30
Neutral. Low inflationary pressure should support the credibility of the floor
while negative carry suggests the koruna can play the role of a funding
currency for the region. In the medium term, we believe the inflation dynamic
will prove crucial in determining the exit strategy from the current policy.

Hungarian Forint EUR 303.6 315.0 320.0
Bearish. The dovish central bank remains our key concern. Yet, our base
case is for only moderate depreciation pressure. With a still-high basic
balance surplus, acceptable growth and a reasonable fiscal position, we do
not envisage any serious difficulty in meeting the external financing needs.

Polish Zloty EUR 4.18 4.10 4.05
Bullish. Poland's economy is rebounding, its credit profile is solid and real
yields are positive. We suspect that most of the negative impact on bond
flows from the pension reform has already passed. Poor EM risk appetite and
Ukraine tensions are risks, but PLN should remain relatively resilient.

Israeli Shekel USD 3.45 3.53 3.55
Moderately bearish. Strong opposition to ILS strength from Bank of Israel
essentially eliminates room for the shekel to appreciate much beyond 3.45, in
our view. FX interventions remain high, yields continue to move against the
currency, and trade exports recently showed a very heavy mom decline.

14 May 2014
Regional Currencies vs.
Spot Forecasts
Comments 3m 12m
Russian Rouble Bask 41.2 43.5 43.0
Moderately bearish. The economy and current account remain weak, and
Ukraine tensions could have important negative implications for asset prices
and growth. However, the CBR has delivered an aggressive response and,
unlike previously, the authorities now appear to see further RUB weakness as
undesirable.
Rouble versus basket: USD 35.1 37.4 37.6
.55*USD+.45*EUR EUR 48.7 50.9 49.6
South African Rand USD 10.36 11.20 11.50
Bearish. We expect further deterioration in domestic fundamentals to combine
with higher US Treasury yields to weaken the rand. However, short-term factors
may keep the rand temporarily supported over the next few weeks.
EUR 14.38 15.23 15.18
Turkish Lira Bask 2.48 2.67 2.75
Bearish. Recent tightening appears sufficient for now to placate markets and
constrain domestic demand. However, the current account deficit should remain
too large to protect against pressures on EMs from rising US yields. Political
risks are elevated and central bank credibility remains to be tested.
Lira versus basket: USD 2.07 2.26 2.37
.50*USD+.50*EUR EUR 2.88 3.08 3.13
Asia

Chinese Renminbi USD 6.23 6.10 6.07
Bullish. The recent rise in the USDCNY fix and resulting rally in the onshore
spot and USDCNH are likely to be temporary. Chinas BoP surplus has risen
sharply and its trade surplus with the US has hit a record level. We continue to
expect the authority to resume trend CNY appreciation in the coming months.
Indian Rupee USD 59.9 61.0 62.5
Bullish vs. forwards. We see scope for INR to appreciate to 58-59 if Friday's
election results confirmed a strong victory for the BJP-led coalition. An absolute
majority could drive a test to 57. We dont think the RBI will intervene
meaningfully against election-related inflows.
Indonesian Rupiah USD 11560 11800 11800 Bearish. Although our forecasts are in line with the NDFs we see risk of bouts
of overshoot around policy and election risk. Market concern about rising fuel
subsidy costs for the government are increasing, creating a risk of a fuel price
shock in the next few months.
Korean Won USD 1023 1045 1055 Bullish vs. JPY. The current account will enter a period of positive seasonality
through to September and Korea's recent improved export performance should
reduce concerns about a negative yen impact.
Malaysian Ringgit USD 3.25 3.33 3.38 Bearish. We expect US yields to rebound into the summer and bond outflows
to resume. Malaysia's current account surplus will likely narrow as robust
investment boosts imports.
Philippines Peso USD 43.9 45.5 45.8 Bearish. Carry remains low , leaving PHP vulnerable to periods of US rate sell-
off. However, the BSP has turned more hawkish recently, providing more
support for PHP than we initially thought.
Singapore Dollar USD 1.247 1.270 1.280 Neutral. We expect Singapores central bank (MAS) to maintain the current
appreciation path for the SGD nominal effective exchange rate. We estimate the
appreciation slope to be 2%pa with +/-2% bandwidth.
Taiwan Dollar USD 30.08 29.80 29.90 Neutral. Taiwans central bank should continue to manage volatility on both
sides. In the very near term, the Chinese government's change in direction for
the USDCNY fix might spur some outflows from the now sizable USDCNT
deposit base in Taiwan, back into TWD.
Thai Baht USD 32.49 33.50 33.50 Bearish. Political stress has risen and could escalate further in the coming
weeks as the Senate looks likely to proceed to appoint a new government.
Exchange rates are home currency per foreign currency unit, unless indicated by * (= inverse quotation).

GLOBAL FIXED INCOME AND ECONOMICS RESEARCH
Ric Deverell
Global Head of Fixed Income and Economics Research
+1 212 538 8964
ric.deverell@credit-suisse.com
GLOBAL MACRO PRODUCT STRATEGY
Sean Shepley
Global Head of CS Macro Product Strategy
+44 20 7888 1333
GLOBAL RATES STRATEGY

GLOBAL COMMODITIES RESEARCH
Helen Haworth, CFA Carl Lantz

Tom Kendall

Co-Head of Global Rates Co-Head of Global Rates

Group Head Jan Stuart
+44 20 7888 0757 +1 212 538 5081

+44 20 7883 2432 +1 212 325 1013
helen.haworth@credit-suisse.com carl.lantz@credit-suisse.com tom.kendall@credit-suisse.com jan.stuart@credit-suisse.com

EU RATES US RATES Marcus Garvey Johannes Van Der Tuin
Panos Giannopoulos Ira Jersey +44 20 7883 4787 +1 212 325 4556
+44 20 7883 6947 +1 212 325 4674 marcus.garvey@credit-suisse.com johannes.vandertuin@credit-suisse.com
panos.giannopoulos@credit-suisse.com ira.jersey@credit-suisse.com
Bhaveer Shah Andrew Shaw
Thushka Maharaj Michael Chang +44 20 7883 1449 +65 6212 4244
+44 20 7883 0211 +1 212 325 1962 bhaveer.shah@credit-suisse.com andrew.shaw@credit-suisse.com
thushka.maharaj@credit-suisse.com michael.chang.2@credit-suisse.com

GLOBAL FX STRATEGY
Marion Pelata Carlos Pro Sean Shepley
+44 20 7883 1333 +1 212 538 1863 Group Head Mark Astley
marion.pelata@credit-suisse.com carlos.pro@credit-suisse.com +44 20 7888 1333 +44 20 7883 9931
sean.shepley@credit-suisse.com mark.astley@credit-suisse.com
Florian Weber William Marshall
+44 20 7888 3779 +1 212 325 5584 Anezka Christovova Alvise Marino
florian.weber@credit-suisse.com william.marshall@credit-suisse.com +44 20 7888 6635 +1 212 325 5911
anezka.christovova@credit-suisse.com alvise.marino@credit-suisse.com
JAPAN RATES
Tomohiro Miyasaka Matthew Derr
+81 3 4550 7171 +1 212 538 2163
tomohiro.miyasaka@credit-suisse.com matthew.derr@credit-suisse.com

TECHNICAL ANALYSIS MARKET STRATEGIES
David Sneddon Sean Shepley
Group Head Christopher Hine Group Head David Homan
+44 20 7888 7173 +1 212 538 5727 +44 20 7888 1333 +1 212 325 5134
david.sneddon@credit-suisse.com christopher.hine@credit-suisse.com sean.shepley@credit-suisse.com david.homan@credit-suisse.com

James Lim Bill Papadakis Glenn Russo
+65 6212 3612 +44 20 7883 4351 +1 212 538 6881
lifeng.lim@credit-suisse.com bill.papadakis@credit-suisse.com glenn.russo@credit-suisse.com

Disclosure Appendix
Analyst Certification
The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
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Emerging Markets Bond Recommendation Definitions
Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate.
Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.
Corporate Bond Fundamental Recommendation Definitions
Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector.
Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and
are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return
basis. These bonds may possess price risk in a volatile environment.
Market Perform: Indicates a bond that is expected to return average performance in its sector.
Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or
they may be stable credits that, we believe, are overvalued or rich relative to the sector.
Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector.
Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including
an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an
investment view on the subject issue.
Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view
on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is a
reasonable, non-material deduction based on an analysis of publicly available information.
Corporate Bond Risk Category Definitions
In addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield
investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative, and Conservative, respectively.
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Credit Suisse may assign rating opinions to investment-grade and crossover issuers. Ratings are based on our assessment of a company's
creditworthiness and are not recommendations to buy or sell a security. The ratings scale (AAA, AA, A, BBB, BB, B) is dependent on our
assessment of an issuer's ability to meet its financial commitments in a timely manner. Within each category, creditworthiness is further detailed with
a scale of High, Mid, or Low with High being the strongest sub-category rating: High AAA, Mid AAA, Low AAA - obligor's capacity to meet its
financial commitments is extremely strong; High AA, Mid AA, Low AA obligor's capacity to meet its financial commitments is very strong; High A,
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financial commitments is adequate, but adverse economic/operating/financial circumstances are more likely to lead to a weakened capacity to meet
its obligations; High BB, Mid BB, Low BB obligations have speculative characteristics and are subject to substantial credit risk; High B, Mid B,
Low B obligor's capacity to meet its financial commitments is very weak and highly vulnerable to adverse economic, operating, and financial
circumstances; High CCC, Mid CCC, Low CCC obligor's capacity to meet its financial commitments is extremely weak and is dependent on
favorable economic, operating, and financial circumstances. Credit Suisse's rating opinions do not necessarily correlate with those of the rating
agencies.

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