Hopes of an IMF package, which has been holding up emerging market currencies in the face of fresh global turmoil, finally seem to be coming to fruition. Over the weekend packages were announced for Hungary, Iceland and Ukraine.

Watch the relative performance today with Turkey, which pointedly turned down a deal, but the ZAR is likely to ride any Eastern European wave stronger.

Separately there are strong rumours that the IMF is planning a credit funding facility for countries with dollar funding problems.

This would make US$14.4bn available to South Africa. Local policy makers seem intent on riding out the storm, so don't expect any immediate uptake but that the facility is available ultimately places some limits on how far the ZAR can fall.

Another day of turmoil is meanwhile in store as fears grow over Japanese banks and as policy makers pull out the stops.

The Bank of Korea cut rates 75bp this morning, the Japanese acted to prop up the stock market, the Australians intervened in the AUD and Asian central banks continued to sell reserves. Perhaps most importantly G7 policy makers hinted that they will act to prevent further JPY strength.

This will limit carry trade unwinding, help shore up Japanese banks and just possibly hints of international action to reduce currency volatility (although US and EU policy makers clearly have banks as their main worry).

Asian stocks don't know what to make of all this though, fluctuating wildly through the day.

Ultimately, of course, it's what the US stock markets make of it all and so, as usual, expect volatility to pick up even further after 15:30 this afternoon as New York opens.

Just perhaps EM currencies will, like Friday, be able to diverge from the global theme. If Eastern European currencies can make some ground when they open then USD/ZAR could test down to 10.90. Resistance at 11.90 and, who knows, we could see both ends on the day. Note that a break in the Dow below 8,125 would send USD/ZAR north again. ZAR gains meanwhile are clearer against the other crosses, with EUR/ZAR notably back to 14.00.

For the week, apart from the IMF and the performance of US equities, watch the Fed on Wednesday where a 50bp cut is expected, possibly 75bp. We also have a string of US and local data. Higher-than-expected local inflation would help support the ZAR.

moneyweb

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