The Global FX Monthly Analyst

October 10, 2013
The Global FX Monthly Analyst

Economics Research
Near-term Risks to our Bullish $/JPY View
The Yen has traded in a wide range since the initial move higher in
$/JPY that ended in April.
One of the primary reasons for this appears to be the less proactive
policy stance from the Abe administration.
The difference between monetary policy in the US and Japan has also
narrowed: the Fed has pushed out tapering and the BoJ will probably
not ease further before next April.
Without much in terms of near-term catalysts for a weaker Yen, the risk
is that range-trading in $/JPY will persist.
Consequently, we have revised our 3- and 6-month $/JPY forecasts to
98 and 103.
Higher inflation than in the past and an eventual increase in rate
differentials still suggest that $/JPY will rise in the long run. Our 2016
forecast remains at 125.
Thomas Stolper
+44(20)7774-5183 thomas.stolper@gs.com
Goldman Sachs International
Robin Brooks
(212) 902-8763 robin.brooks@gs.com
Goldman, Sachs & Co.
Fiona Lake
+852-2978-6088 fiona.lake@gs.com
Goldman Sachs (Asia) L.L.C.
After a strong rally in $/JPY earlier in the year, the catalysts for further
near-term Yen weakness have become rarer. The reform momentum of
Abenomics has slowed. Recent communications by PM Abe highlight that
structural reforms are more difficult to implement. The confirmed hike in
the sales tax will tighten fiscal policy again. In addition, earlier expectations
of further proactive BoJ easing have been disappointed. Japanese equity
markets have been moving sideways for some time. Meanwhile, the Fed
has become more dovish again, in particular in the context of tighter
financial conditions and the fiscal uncertainty in the US. The risks for a
temporary $/JPY correction have clearly increased, and it looks as if the
period of range-trading in $/JPY can persist. This is reflected in our new 3and 6-month forecasts of 98 and 103.
Over longer horizons, we continue to believe that rising interest rate
differentials and higher inflation in Japan warrant a bullish view on $/JPY.
Our 2016 forecast remains at 125.
Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification
and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html.
The Goldman Sachs Group, Inc.
Global Investment Research
October 10, 2013
Contents
G3
US Dollar
Euro
Japanese Yen
Europe, Middle East & Africa
British Pound
Czech Koruna
Hungarian Forint
Israeli Shekel
Norwegian Kroner
Polish Zloty
Russian Ruble
South African Rand
Swedish Krona
Swiss Franc
Turkish Lira
Ukrainian Hryvnia
Americas
Argentine Peso
Brazilian Real
Canadian Dollar
Chilean Peso
Colombian Peso
Mexican Peso
Peruvian New Sol
Venezuelan Bolivar
Asia
Australian Dollar
Chinese Yuan
Hong Kong Dollar
Indian Rupee
Indonesian Rupiah
Korean Won
Malaysian Ringgit
New Zealand Dollar
Philippine Peso
Singapore Dollar
Taiwan Dollar
Thai Baht
Interest Rate Forecasts
Recommended FX Trade Ideas
FX Currents
GS Trade-Weighted Indices
M&A Flows
GSDEER
Key Economic Data
GDP Growth (%ch yoy)
Consumer Prices (%ch yoy)
Current Account Balance (% of GDP)
Broad Balance of Payments (% of GDP)
Foreign Exchange Reserves (US$bn)
Government Debt as % of GDP
Policy Rate Forecasts
Exchange Rate Forecasts
Euro Crosses
Dollar Crosses
Disclosure Appendix
Goldman Sachs Global Investment Research
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October 10, 2013

After a strong rally in $/JPY earlier in the year, the catalysts for further Yen weakness have
become rarer. The reform momentum of Abenomics has slowed and the Fed has become
more dovish again, in particular in the context of tighter financial conditions and ongoing
fiscal uncertainty in the US. The rally in Japanese equity markets has also stalled, at least
for now. The risks for a temporary $/JPY correction have clearly increased, and it looks as if
the period of range-trading in $/JPY can persist. This is reflected in our new 3- and 6-month
forecasts of 98 and 103. Over longer horizons, we continue to believe that rising interest
rate differentials and higher inflation in Japan warrant a bullish view on $/JPY. Our 2016
forecast remains at 125.
1. Revision of our JPY forecasts

After a period of substantial weakness starting last autumn, the Yen has stabilised in an
increasingly narrow trading range. The key catalysts for the next leg higher in $/JPY remain
unchanged but, realistically, we think the timing should be pushed further into the future.
We also see a number of increasingly important shorter-term risks to our underlying
bearish JPY view. This suggests that the period of range-trading can extend before the next
move higher in $/JPY. More specifically, we think $/JPY will remain in a range close to
current levels at 98 over the next 3 months, before gradually drifting higher towards 107 in
12 months. Towards the end of our forecasting horizon in 2016, we continue to expect
$/JPY to reach 125.
2. Clear Yen-Negative Factors

The two principal negative factors exerting downside pressure on the Yen are changing
inflation expectations and interest rate differentials.
Rate Differentials have been the most important driver of the Japanese Yen over the last
10 years or so. Lower interest rates in Japan than elsewhere would likely lead to a
sustained downward move in the Yen. There are several reasons for this dynamic, but
ultimately they can all be considered a variation on the carry theme. When rates rise
overseas, Japanese investors are attracted by higher carry in foreign currency deposits. But
similarly, it becomes more expensive for Japanese investors with existing overseas assets
to hedge these.
Hedging dynamics are particularly important for the JPY because of the large net foreign
asset position of Japanese investors. Japans net foreign asset position stands at $3.0trn,
of which $2.5trn are overseas portfolio investments in bonds and notes.
It is unclear just how much of this exposure is FX-hedged, but most fixed income investors
globally have a preference to hedge their currency risk, simply to reduce the currencyinduced volatility. But the cost of FX hedging is an important consideration. When shortdated rate differentials widen and overseas yield curves flatten, the cost of carry on the FX
hedge becomes increasingly similar to the coupon payments on the underlying fixed
income asset. As a result, the incentive to lift at least part of FX hedges on fixed income
portfolios becomes larger. The same dynamic could be observed from 2004/2005 when the
Fed last entered a hiking cycle and we believe this will be the case again. We expect the
Fed to hike rates from 2016 onwards.
October 10, 2013
Exhibit 1: Interest rate differentials remain key for the

JPY
4.5
level
bps
125
4.0
120
3.5
115
110
3.0
Exhibit 2: Inflation surveys hint at rising inflation

expectations since the start of Abenomics
60
% of all
Households
1y expectation of price appreciation in 2%-5% area
50
1y expectation of price appreciation in 0% area

40
105
2.5
100
2.0
95
1.5
90
1.0
USD swap 5y - JPY

swap 5y (RHS)
0.5
85
USDJPY
75
05
06
20
10
80
0.0
04
30
07
08
09
10
11
Source: Goldman Sachs Global Investment Research
12
13
0
04
05
06
07
08
09
10
11
12
13
Source: Haver Analytics, Goldman Sachs Global Investment Research
New Inflation Target One of the Three Arrows of Abenomics is to beat deflation and
lift consumer prices by about 2% annually. Exceptionally easy BoJ policy aims at achieving
this. So far the success has been mixed. Wage growth remains stubbornly low although
surveys suggest that inflation expectations are on the move (see Exhibit 2). This is partly
related to the rise in fuel prices, which itself is the result of a weaker Yen. Overall, inflation
dynamics seem to be moving in the direction of the higher inflation target.
The importance for FX needs to be seen in the context of Purchasing Power Parity or other
fair value models. One of the reasons why the JPY has been on an appreciating trajectory
for decades is simply thanks to the steady gain in competitiveness owing to lower inflation
rates. As Dominic Wilson discussed in detail in February (see Global Economics Weekly
13/05), a rise in long-term inflation expectations is consistent with markets pricing a weaker
fair value for the Yen as well. Combined with expectations for persistent negative real
rates, this is consistent with a weaker JPY even today. The more proactive the BoJ is in
achieving this inflation target, the more likely it is the market will price this changed
trajectory for a weaker Yen fair value. There is certainly scope for markets to price higher
inflation rates, which would translate into further JPY weakness.
3. Additional Yen-Negative Factors (or maybe not?)

In addition to the two forces mentioned above, market participants have tried to construct
the case for more Yen-negative factors. Quite a number of these may not be quite as
negative as suggested, so we are cautious about using these arguments.
Current Account Deficit Apart from brief exceptions, Japan is currently still running a
current account surplus. After a decline in recent quarters, it has now stabilised at about
1% of GDP on a four-quarter trend basis. Japan does have a trade deficit these days but,
given its extremely strong net foreign asset position, investment income more than offsets
the trade deficit.
Unsustainable Debt Levels Japans government debt levels are very high. But it is
important to recognise that Japan as a country is a large net creditor to the rest of the
world. Foreign holdings of Japanese General Government Debt account for only 8.4% of
the total. A simple default of externally held debt is an extremely unlikely scenario in this
context, in particular because Japan has so many overseas assets. This also makes it
difficult to link Yen weakness to a rising risk premium on government debt. Still, the Yen
October 10, 2013
could weaken indirectly as a result of the debt situation to the extent that higher inflation
rates are a way to deal with the nominal government debt stock, which brings us back to
the inflation dynamics discussed above.
Correlations with Equities Over the past year or so the correlation between Japanese
stocks and $/JPY has been exceptionally high. A constructive view on the basis of
continued reforms in Japan under Prime Minister Abe could therefore be seen as a JPYnegative and equity-positive factor. Looking at this in more detail, there is a clearly a risk
that the correlation could change again and become weaker. For most of 2012, for example,
it had been much closer to null than currently. From a historical perspective, correlations in
daily returns have been fairly high since the early tremors of the Global Financial Crisis
(GFC) in 2007. However, much of this has been due to high cross-asset correlations. The
correlation between the SPX and the JPY was just as high (Exhibit 3). What has changed
since the end of last year is that Yen correlations with the Nikkei have strengthened even as
most other cyclical asset correlations with the Yen have weakened. This kind of disconnect
is rare and we have to go back to the mid-1990s to see a similar divergence. It is possible
that the changing correlations are indicative of a structural change in Japan linked to
Abenomics. When judged purely by history, it is just as likely that the correlations will
weaken again and that the Yen-Nikkei will start move in a more independent way. In any
case, it will be interesting to watch this.
4. Reasons to be Cautious about the Short-Term Outlook

Timing of US Rate Hikes Given the importance of interest rate differentials for the JPY,
the first rate hike by the Fed will be a key event. Exhibit 4 shows the basic $/JPY patterns in
relation to the Fed Funds rate. In the last three hiking cycles, starting in 1994, 1999 and 2004,
$/JPY troughed well after the hikes had begun typically many months later. If this pattern
persists, and if our Fed forecasts for early 2016 are correct, then it may take until late 2016
before $/JPY finally starts to react to interest rate differentials. But it seems difficult to link Fed
tapering to a weaker Yen if at the same time the Fed strengthens forward guidance. The
fact that tapering has been delayed relative to earlier market expectations emphasises even
further just how high the threshold is for genuine Fed tightening. The Fed signalled a
tightening of financial conditions linked to a sharp bond sell-off and fiscal uncertainty as
reasons for delaying the tapering decision. Indeed, we may have to wait for a number of
quarters before nominal interest rate differentials at shorter duration and related carry
dynamics become a key driver of further JPY depreciation.
Exhibit 4: $/JPY typically turns higher after the Fed hikes
start
Exhibit 3: Nikkei-Yen correlation in daily returns is

exceptionally high currently
0.6
1y correlation of Nikkei 225 with USDJPY

1y correlation of SP500 with USDJPY
level
0.5
0.4
0.3
level
160
US Fed fund target rate
150
USDJPY (RHS)
140
130
120
110
-0.1
100
-0.2
90
-0.3
80
0.2
0.1
0.0
-0.4
90
92
94
96
98
00
02
04
06
08
10
12
14
70
90
92
94
96
98
00
02
04
06
08
10
12
14
October 10, 2013
Speculative Positioning We have mentioned this factor several times in the past as a
risk that could at some point lead to a move lower in $/JPY. Speculative positioning
remains extremely stretched according to the IMM data. As a percentage of open interest,
the non-commercial long $/JPY position is now comparable to the extremes seen during
the peak carry trading activity before the GFC (see Exhibit 5). At the same time, a large
speculative position alone is not a guarantee for a sharp unwinding; it merely increases the
probability of such a move. It is also quite normal to see sizable and persistent speculative
positions during periods of fundamental change. The FX market could therefore remain
positioned long $/JPY until rate differentials ultimately become the key driver.
Exhibit 5: Speculative positioning in $/JPY stretched to a similar extent to during the preGFC carry period
60
% of open interest
40
20
0
-20
-40
Net speculative position in USDJPY futures
-60
02
03
04
05
06
07
08
09
10
11
12
13
Abes Arrows lose Momentum The initial phase of Abenomics was dominated by
proactive monetary and fiscal easing. After the first two arrows were fired, the third arrow
structural reforms has been less impactful. For example, earlier this month PM Abe
highlighted that structural reforms in the labour market were more difficult than initially
hoped for. Loss of momentum can be observed for the two other arrows too. After very
proactive easing in April, additional measures by the BoJ are now unlikely before Spring
2014. On the fiscal side, the government decided to go ahead with the long planned rise in
the sales tax at the beginning of the next fiscal year. Offsetting measures will be
announced in December but it is already clear that these will not be able and are not
designed to fully offset the negative growth impact from the tax hike. Overall, the
momentum of Abenomics has slowed and most investors have become much less focused
on the changes in Japan. With positioning in FX markets still stretched, this increases the
risks of a temporary setback. At the same time, a more reactive BoJ will likely respond to a
period of renewed Yen strength and step up monetary easing. This would reduce the
downside risks to $/JPY.
US Fiscal Risks A very short-term risk that is worth mentioning is the fiscal uncertainty in
the US. If the negotiations continue to fail, growth-reducing fiscal policy disruptions are
ultimately possible. This would affect many risky assets, including equity markets. With
correlations relatively high, as discussed above, such a scenario could easily translate into
a period of JPY strength. Moreover, the Fed highlighted at the last FOMC meeting that
October 10, 2013
fiscal policy is one of the risks that has led to a delayed tapering of asset purchases. A
protracted fiscal dispute would further increase the likelihood of continued monetary
accommodation.
5. The Path Ahead for $/JPY

If we combine our continued views on the long-term outlook for $/JPY with the near-term
risk factors, it looks quite likely that $/JPY will go through a period of range-trading before
it can rally further. Just when this additional rally will materialise is unclear at the moment
and will depend not only on the actual timing of US rate hikes but also on market
expectations of these. Additional policy stimulus in Japan could also be the trigger. None
of these factors is likely to materialise before the end of the year, which is why we changed
our 3-month forecasts to 98 from 105 previously. In addition to the flattish near-term
forecast, we highlight tactical risks to the downside, which we already expressed in a trade
recommendation to be short $/JPY.
Looking further ahead, we expect additional monetary policy easing and some further
structural reforms around the beginning of the next fiscal year. This suggests that $/JPY
could start to drift higher in the first quarter next year. This would also correspond to the
expected start of Fed Tapering. On a 6-month horizon we expect $/JPY to trade at 103,
drifting further up towards 107 on a 12-month basis. This view is largely contingent on a
continued strong relationship between $/JPY and Japanese equities, as well as our
constructive forecasts for Japanese equities. Rate differentials will likely be the drivers of
further appreciation to 115 by the end of 2015 and 125 by the end of 2016. We have not
changed these long-term forecasts.
The risks to our views are clear from the underlying rationale. The key risks are probably
the following: an earlier policy tightening in the US than we currently project would be the
primary reason to expect a faster $/JPY appreciation. On the other hand, a sluggish
performance of Japanese equities would likely put downside pressure on $/JPY.
6. Other Forecast Changes

The last few months of depreciation in EM currencies have led to a number of forecast
revisions on the 3-12 month horizon. In some cases the longer-dated forecasts for 2015 and
2016 had not been fully adjusted. This has now been done and the last two tables in this
publication reflect our views on the long-term outlook for the currencies we cover.
With regards to our 3-, 6- and 12-month views, the only notable changes this month are
revisions for the KRW and the BRL, which both reflect recent price action. In Brazil in
particular, the Central Bank's policy to stabilise the exchange rate has had a positive impact
on the Real so far.
Exhibit 6: New FX Forecasts
New Forecasts
Current
Old Forecasts
6m
12m
3m
6m
12m
$/JPY
09/10/2013
97.24
3m
98.00
103.00
107.00
105.00
105.00
110.00
$/BRL
2.21
2.25
2.30
2.40
2.35
2.35
2.45
$/KRW*
1076
1080
1100
1100
1110
1100
1100
$/CNY
6.12
6.16
6.15
6.15
6.16
6.16
6.16
*Forecast changes released since our last FX Monthly was published

October 10, 2013
G3
US Dollar
FX Forecasts: We maintain our EUR/$ forecasts at 1.38, 1.40 and 1.40 in 3, 6 and 12 months but we have revised our
$/ forecasts to 98, 103 and 107 in 3, 6 and 12 months. Current GSDEER for EUR/$: 1.19; $/: 104.4.
Motivation for Our FX View: The large structural deficits in the US balance of payments and government budget
combined with a declining Euro area risk premium should contribute to a weaker Dollar against the Euro. Monetary
policy is likely to remain accommodative, as illustrated by the decision to delay the tapering of asset purchases. We now
expect tapering to start at the December FOMC meeting. This may provide support to the Dollar through higher bond
yields, particularly against EM currencies. That said, in our view, the acceleration in US and global activity through the
end of 2013 (our forecast) is likely USD-negative, linked to falling risk aversion and US capital outflow.
Monetary Policy and FX Framework: The Fed has a dual growth and inflation target. As a result, monetary policy has
generally been more volatile and reactive than in pure inflation-targeting countries. The exchange rate floats freely. The
US Treasury is in charge of FX policy, although the Fed occasionally also comments on currency issues.
Growth/Inflation Outlook: 2Q2013 real GDP growth surprised slightly to the upside at 2.5%qoq ann. Our Current
Activity Indicator picked up to 3.0% in August, but we expect moderate growth in 2013 at 1.6%, partly linked to fiscal
drag. The latter could increase if discussions about the government shutdown and debt ceiling extend. We see
considerable spare capacity in the economy, underpinning our view of a deceleration in core inflation to 1.8% in 2013.
Monetary Policy Forecast: We now expect the Fed to announce a tapering of open-ended asset purchases at the
December FOMC meeting. The Fed has also committed to keeping the Federal Funds rate between 0 and 0.25%, while
unemployment remains above 6.5%. In addition to the unemployment rate, the Fed will monitor other indicators with the
aim of tightening only when the labour market displays broad-based signs of improvement. Inflation one to two years
ahead is projected to be below 2.5%. We expect the first rate hike in 1Q2016.
Fiscal Policy Outlook: Fiscal policy is currently a significant drag on growth but this is expected to diminish towards
the end of the year. The deficit has fallen sharply in recent months and is expected to decline over the next few years.
The longer-run fiscal outlook remains problematic and entitlement reforms are needed to ensure sustainability.
Balance of Payments Situation: The US BBoP deficit widened on a trend basis by 0.4% of GDP to -4.0 % in 2Q2013.
The current account deficit improved slightly on a trend basis to 2.5% of GDP in 2Q2013. During 1H2013, the US has
witnessed record portfolio outflows, mainly targeting Europe.
Things to Watch: We continue to monitor capital flow trends in the monthly TIC data for signs of any persistent
improvement in the BBoP.
Thomas Stolper
USD TWI
US: BBoP vs. Current Account
120
Index
1980=100
115
110
% of GDP
4qtr avg
105
100
-2
95
TWI
Appreciation
90
-4
85
80
Nominal TWI
75
GSDEER TWI
70
96
98
00
02
04
06
08
10
Source: Goldman Sachs Global Investment Research.
12
14
-6
Current Account
BBoP
16
-8
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
October 10, 2013
US Industrial Production and Real GDP

15
US Inflation
6
%yoy
10
F'cast
4
3
-5
0
-1
-10
Industrial Production
G10 Inflation
-2
Real GDP
-15
%yoy
F'cast
90 92 94 96 98 00 02 04 06 08 10 12 14
-3
US CPI
92
94
96
98
00
02
04
06
08
US Trade Volumes
US Terms of Trade
24
20
16
12
8
4
0
-4
-8
-12
-16
-20
-24
% yoy
3-mth ma
Exports
Imports
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
112
110
108
106
104
102
100
98
96
94
92
90
88
86
89 91 93 95 97 99 01 03 05 07 09 11 13
GS Commodity Indices
FED rate vs. 10yr yield and S&P500
Index
500
300
7
6
700
600
UST 10y yield
Index
S&P GSCI Energy Index

S&P GSCI Industrial Metal Index
S&P GSCI Agriculture Index
S&P GSCI Index (rhs)
SPX (rhs)
00 01 02 03 04 05 06 07 08 09 10 11 12 13
300
100
0
1700
1500
1300
400
200
1900
FED funds rate
500
200
900
800
400
100
1000
14
TOT
Improvement
Source: Haver Analytics
Index
12
Index
1990=100
600
10
1100
900
1
0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
700
October 10, 2013
Euro
FX Forecasts: We maintain our EUR/$ forecasts at 1.38, 1.40 and 1.40 in 3, 6 and 12 months. This implies EUR/ at 135.2,
144.2 and 149.8 in 3, 6 and 12 months. GSDEER for EUR/$: 1.19.
Motivation for Our FX View: Our positive stance on the EUR is due to the strong current account and BBoP trend for
the Euro area. In contrast to the weaker balance for the US, this structural imbalance implies a gradually weaker USD and
a stronger EUR. Downside risk remains in the Euro area, with growth remaining weak and the ECB signalling that it
expects to keep rates low, with a downward bias, for an extended period. Meanwhile, the Fed is also expected to keep
rates on hold until 2016. Notable cyclical improvements in the Euro area make it likely that risk premia will continue to
decline. Many investors have substantially reduced EUR exposure during the crisis and capital flow data suggest
declining risk premia have led to renewed inflow. EM central banks have started to raise slightly their holdings of EUR.
Monetary Policy and FX Framework: The ECB is a strict inflation targeter and has recently made more explicit its
inflation-based forward guidance. As a Central Bank serving 17 countries, the ECB is arguably the most independent
Central Bank in the world. The Euro is a freely-floating currency. FX policy responsibility is not clearly defined, but in
practice the ECB is unlikely to act in FX markets without Eurogroup approval.
Growth/Inflation Outlook: GDP in 2Q2013 moved back into positive territory at +0.3%qoq annualised. We expect a
modest sequential improvement from here and forecast 0.9% growth in 2014. We expect inflation to remain stable at
1.5% in 2013 and 2014. Recent activity indicators have been more encouraging, including a broad improvement in PMIs
in the past few months, with key peripheral countries on the verge of positive growth.
Monetary Policy Forecast: The Governing Council left the main refinancing rate and the deposit rate unchanged at
0.50% and 0.0% in October. Previously the ECB also introduced forward guidance, in particular that key ECB interest rates
would remain at present or lower levels for an extended period of time. We expect the ECB to keep rates on hold until
2015, although excessive EUR strength or weaker activity data would increase the likelihood of a rate cut in the
meantime. We expect another LTRO in December, mainly to alleviate funding stress for some peripheral banks.
Fiscal Policy Outlook: The Euro area has tightened fiscal policy more and earlier than most other regions and
countries. 2012 was the peak of fiscal tightening. By 2014 fiscal policy is projected to turn neutral for growth. The Euro
area already runs cyclically adjusted primary surpluses, although some individual countries have not yet reached that
stage.
Balance of Payments Situation: The Euro area runs an increasingly sizeable current account surplus, leading to a
positive BBoP. Capital inflows into the Euro area have picked up in recent months as macro data have started to improve.
Things to Watch: Developments in the European sovereign situation, in particular implementation of fiscal reforms and
long-term fiscal and political reforms. Near-term risks include Italian politics and the next Troika review for Greece.
Thomas Stolper
Euro area: BBoP vs Current Account
EUR/$
1.70
5%
4%
1.50
% GDP
12-mmas
CA
BBoP
3%
2%
1.30
1%
0%
1.10
-1%
0.90
-2%
0.70
0.50
Spot
-3%
GSDEER
-4%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-5%
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
10
October 10, 2013
Euro area Industrial Production and real GDP

10
Euro area Inflation

5
F'cast
%yoy
%yoy
F'cast
-5
1
0
-10
-1
-15
Industrial Production
-20
G10 Inflation
-2
Real GDP
-3
90 92 94 96 98 00 02 04 06 08 10 12 14
Euro area CPI
92
94
96
98
00
02
04
06
08
Euro area Trade Volumes
Euro area Terms of Trade
20
16
12
8
4
0
-4
-8
-12
-16
-20
-24
130
% yoy
3-mth ma
125
14
120
115
110
105
100
95
90
Import
Export
03
04
05
TOT
Improvement
85
06
07
08
09
10
11
12
80
13
89 91 93 95 97 99 01 03 05 07 09 11 13
EUR/$ vs 2yr Rate Differential
EUR/USD: 3-mth Risk Reversals
EUR/$
1.8
2.0
1.7
1.0
1.6
1
1.5
1.4
1.3
-1
-2
-3
12
Index
2000=100
10
2-yr Germany Swap Minus 2-yr US Swap

EUR/$ (rhs)
06
07
08
09
10
11
12
13
Vol
0.0
-1.0
-2.0
1.2
-3.0
1.1
-4.0
1.0
-5.0
08
09
10
11
12
13
11
October 10, 2013
Japanese Yen
FX Forecasts: We have changed our view. We expect USD/JPY to trade at 98, 103 and 107 in 3, 6 and 12 months from
105, 105 and 110 previously. This implies EUR/ at 135.2, 144.2 and 149.8 in 3, 6 and 12 months. The current $/ GSDEER
is 104.4 and EUR/ is 124.0.
Motivation for Our FX View: $/JPY has been essentially range-bound since early April after expectations of aggressive
easing from the BoJ, which were subsequently delivered, pushed the cross above 100. The range-bound price action has
occurred despite the ongoing widening of interest rate differentials between the US and Japan, which suggests the cross
could trade higher than it has done. Instead, moves in $/JPY are more closely aligned with developments in Japanese
equities. In the near term, it is difficult to see a catalyst that would push $/JPY higher: the Fed has delayed the start of
tapering (which we now expect to occur in December), the BoJ refrained from easing in October and details of PM Abes
Third Arrow are still in short supply. Indeed, he appears to be moving away from notable labour market reform. Our
longer-dated forecast remains 125 at end-2016. At that point, we expect the Fed to have started raising the Fed Funds rate
but we think the BoJ will likely still be in easing mode.
Monetary Policy and FX Framework: After adopting a 2% inflation target earlier this year, the BoJ has changed its
main operating target for monetary market operations for a monetary base control, from the uncollateralised overnight
call rate. Open market operations will be conducted such that the monetary base will increase at an annual pace of
60trn-70trn. The Yen is formally a freely floating currency, but the MoF is in charge of FX policy and has often
intervened in the past.
Growth/Inflation Outlook: Mr Abe announced that the consumption tax will be raised to 8% from 5% in April 2014 and
accompanied this announcement with the outline of an economic package designed to ease the potential drag from the
hike. Based on the package, we have nudged up our real GDP growth forecast to 1.0% for FY2014, from 0.6%.
Monetary Policy Forecast: To meet its objectives, the BoJ will purchase 7trn-worth of JGBs per month up to a
maturity of 40 years. This will lengthen the average time to maturity from just under three years to around seven years.
The pace of increase in ETF and REIT holdings will be stepped up by 1trn and around 30bn, respectively. ETF holdings
will likely increase to 2.5trn at end-2013 and 3.5trn at end-2014. We do not expect the BoJ to take further steps for the
time being.
Fiscal Policy Outlook: Japan has introduced a supplementary budget of over 10trn for FY2012.
Balance of Payments Situation: Japan now runs a BBoP surplus on account of an ongoing current account surplus
and more recently very strong repatriation of foreign bonds. Unlike in other countries, bond outflows in recent years
have typically coincided with Yen strength.
Things to Watch: Any increased focus on Japans fiscal and debt levels, particularly if question-marks over
unsustainability start to emerge more forcefully.
Fiona Lake
Japan: BBoP vs Current Account
$/
300
8%
Spot
GSDEER
250
6%
% GDP
12-mma
4%
2%
200
0%
-2%
150
-4%
-6%
100
-8%
50
-10%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
CA
BBoP
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Haver Analytics, GS Global Investment Research
12
October 10, 2013
Japan Industrial Production and real GDP

15
%yoy
Japan Inflation
30
20
F'cast
10
10
0
0
-10
-5
-10
Real GDP
-15
90 92 94 96 98 00 02 04 06 08 10 12 14
F'cast
3
2
1
0
-20
-1
-30
-2
-40
-3
Industrial Production (rhs)
%yoy
G10 Inflation
Japan CPI
92
94
96
98
00
02
04
06
08
Japan Trade Volumes
Japan Terms of Trade
50
185
% yoy
3-mth ma
40
175
30
165
20
155
10
145
Index
2010=100
TOT
Improvement
115
-20
105
-30
-40
Exports
95
Imports
85
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
75
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
$/JPY vs 2yr Rate Differential
USD/JPY: 3-mth Risk Reversals
14
125
-10
12
135
-50
10
$/JPY
2-yr US Swap Minus 2-yr
Japan Swap
6
5
125
120
115
110
JPY/$ (rhs)
105
-2
100
-4
95
90
85
-8
-1
80
-10
-2
75
05
06
07
08
09
10
11
12
13
Vol
-6
-12
08
09
10
11
12
13
13
October 10, 2013
Europe, Middle East & Africa

British Pound
FX Forecasts: We maintain our EUR/GBP forecasts at 0.82, 0.83 and 0.85 in 3, 6 and 12 months. This implies GBP/$ at
1.68, 1.69 and 1.65 in 3, 6 and 12 months. Current GSDEER for EUR/GBP is 0.81 and for GBP/$ is 1.47.
Motivation for Our FX View: The UK has experienced a substantial improvement in activity indicators in recent
months. Part of this may be related to a recovering Euro area economy and part linked to the acceleration in credit
growth. The composite PMI stands at close to the highest level since the mid-1990s. This economic strength will likely
support capital inflows, which would offset some of the external vulnerability linked to the relatively large current
account deficit. As a result, we expect Sterling to strengthen against most currencies in the near term, although the
external deficit will ultimately limit Sterlings ability to rally persistently against the Euro.
Monetary Policy and FX Framework: The Bank of England is tasked with price stability, defined as CPI at 2% over
time. If inflation falls below 1% or rises above 3%, the BoE must write a letter of explanation to the Chancellor of the
Exchequer. The Central Bank introduced forward guidance with a 7% unemployment threshold and an inflation
knockout. Sterling operates under an entirely free float, although the BoE occasionally comments on exchange rate
developments.
Growth/Inflation Outlook: GDP data for 2Q2013 increased 0.7%qoq, slightly exceeding expectations. We expect the
economy to grow by 1.4% in 2013. We expect spare capacity in the UK economy to pull inflation lower in the longer term,
averaging 2.6%yoy in 2013 before falling to 2.4% in 2014 and 2.0% in 2015.
Monetary Policy Forecast: Although the recently introduced threshold guidance was immediately followed by a series
of positive economic data surprises, we do not think the BoE will reconsider its accommodative policy any time soon. We
expect stable QE holdings and rates to be on hold until at least the end of 2015.
Fiscal Policy Outlook: The government still plans to reduce the deficit gradually, albeit at a slower pace than initially
projected. The deficit is expected to reach 1.6% in 2017-18. Most of the adjustment will occur via spending cuts, with tax
changes minor in comparison.
Balance of Payments Situation: We forecast a current account balance of -3.1% of GDP in 2013, currently tracking at
-4.3%, compared with the 3.8% deficit in 2012. Portfolio flows remain difficult to assess given the large gross cross-border
flows linked to London as a financial centre.
Things to Watch: The impact of the cyclical acceleration on capital inflows remains a key factor. If strong credit demand
leads to further widening of the current account deficit, this could become a problem further in the future.
Thomas Stolper
UK: BBoP vs. Current Account
EUR/
1.00
15%
0.90
10%
0.80
5%
0.70
0%
0.60
-5%
0.50
-10%
Spot
0.40
GSDEER
0.30
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
% GDP
4-qtr ma
CA
BBoP
-15%
-20%
98
01
04
07
10
13
14
October 10, 2013
Czech Koruna
FX Forecasts: We keep our EUR/CZK forecast at 25.85 in 3 and 6 months, and 25.5 in 12 months, respectively. This
implies a USD/CZK forecast of 18.7, 18.5 and 18.2. Current GSDEER for EUR/CZK is 23.5, equivalent to an 8.2%
undervaluation. USD/CZK GSDEER is 19.7.
Motivation for Our FX View: We expect the CNB Board to maintain its dovish and pro-intervention stance to reduce
deflation risks given the very benign inflation outlook, subdued domestic demand, and slow and limited pass-through of
rate cuts. That said, we think that, for now, the Board will continue to focus on verbal interventions and only a strong reemergence of appreciation pressures could persuade the CNB to enter the market directly. This approach may lead to
questions about the credibility of the intervention threat and the risk of a market test of the CNBs resolve. Signs of
recovery should reduce the need for lasting Koruna weakness, while the Czech Republics strong balance sheet, low stock
of external debt and limited reliance on foreign funding should support the Koruna over the longer term.
Monetary Policy and FX Framework: The CZK is a freely-floating currency and the CNBs inflation target is 2%. But
the very benign inflation outlook and lack of space to cut rates further have led the CNB to reaffirm its readiness to
weaken the Koruna, should more monetary easing be needed.
Growth/Inflation Outlook: Growth improved more than expected in 2Q2013 thanks to stronger exports and a more
supportive fiscal position. The economy should gain more strength in 2H2013, but weak domestic sentiment will weigh
on the recovery. We expect inflation to stay below or close to the target in 2H2013-2014.
Monetary Policy Forecast: The CNB cut the policy rate to a record low 0.05% in November 2012 and narrowed the
interest rate corridor to push market rates lower. The CNB will likely stick to verbal FX interventions for now, although
renewed appreciation pressures may lead it to start selling the Koruna in the FX market.
Fiscal Policy Outlook: The previous government revised the 2013 fiscal outlook towards an even lower deficit and
funding needs. For 2014, the fiscal stance is likely to be loosened somewhat, although the change in government has
made the outlook more uncertain.
Balance of Payments Situation: The Czech Republic maintains a trade surplus but the income account remains in
deficit owing to the high share of profits from FDI. Any resulting current account deficit should be easily financed with
sustained FDI and portfolio inflows. Correcting for FDIs, the Czech Republic has a positive Net International Investment
Position.
Things to Watch: General elections take place in late October. Polls suggest the Social Democrats are likely to be the
largest party in the new parliament although it is not yet clear whom they would choose as a coalition partner, if
necessary. If in government, the Social Democrats plan to return to more progressive taxation, impose special taxes on
regulated sectors, including banks, and abandon the creation of the mandatory pension funds.
Magdalena Polan
Czech Republic: BBoP vs. Current Account
EUR/CZK
10%
45
40
Spot
8%
GSDEER
6%
35
4%
30
2%
0%
25
-2%
-4%
20
-6%
15
10
% GDP
4-qtr ma
-8%
95
97
99
01
03
05
07
09
11
13
15
-10%
CA
BBoP
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
15
October 10, 2013
Hungarian Forint
FX Forecasts: We maintain our EUR/HUF forecast unchanged at 300, 305 and 310 in 3, 6 and 12 months, respectively.
This implies USD/HUF at 217, 218 and 221 in 3, 6 and 12 months. The current GSDEER for EUR/HUF is 297, which implies
a small 1.5% overvaluation against the Euro. USD/HUF GSDEER is 250.
Motivation for Our FX View: The Forint remains sensitive to demand for EM assets and the outlook for global rates.
However, the MPCs more cautious tone, still-positive real rates, a current account surplus and a more dovish Fed have
recently helped anchor the Forint. Still, the ongoing discussions on an FX debt exchange and, especially, the pre-election
news could lead to more short-term weakness and volatility. In the longer term, the structural drivers of the currency
remain unchanged and the Forint will likely continue to suffer from FX deleveraging and lower potential economic
growth. The rate differential, which has narrowed further on the back of more cuts this year and higher US rates, could
also start to erode demand for Hungarian assets. Moreover, while Forint weakness appears to be one of the policy
objectives for the future, the government and the NBH will be unwilling to allow the Forint to depreciate yet, before
further reducing households and the governments FX sensitivity and in any case not before the next elections in early
2014. That said, the NBHs tolerance for FX depreciation has increased already.
Monetary Policy and FX Framework: The NBH has a formal, medium-term (18 months-2 years) inflation target of 3%
but also adjusts rates to respond to growth and financial stability risks. The MPC normally holds rate-setting meetings
every fourth Tuesday of the month.
Growth/Inflation Outlook: Annual growth turned positive in 2Q2013 thanks to re-stocking, recovering investments and
public spending. Inflation is well below the target and should stay low in 2014 as well, thanks to additional cuts in utility
prices and lower oil prices. The effect of earlier tax hikes should limit the fall in core inflation.
Monetary Policy Forecast: The NBH has cut rates by 340bp since August 2012 and more easing will likely follow, as
long as market conditions allow. It also plans to ease financial conditions through other means, such as the funding for
lending plan, recently expanded and extended till end-2014.
Fiscal Policy Outlook: The Fidesz government has been pursuing ambitious fiscal goals to reduce debt. The deficit was
cut to 1.9% of GDP last year and should stay just below 3% in 2013-2014. But sustainable debt reduction will take time
given low growth. There is some risk of a deficit target overrun given the forthcoming elections.
Balance of Payments Situation: The current account should remain in surplus in 2013, while the financial account will
remain under pressure from sustained FX debt repayments.
Things to Watch: The government has started its election campaign. This increases the risk of more populist policies,
including more government spending, as well as a tougher stance in negotiations with commercial banks on currency
conversion of the FX debts. Political news flow may increase Forint volatility in the run-up to April 2014 elections.
Magdalena Polan
Hungary: BBoP vs. Current Account
EUR/HUF
320
20%
290
15%
260
10%
230
% GDP
4-qtr ma
CA
BBoP
5%
200
0%
170
140
Spot
110
GSDEER
80
95
97
99
01
03
05
07
09
11
13
-5%
-10%
15
-15%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
16
October 10, 2013
Israeli Shekel
FX Forecasts: We maintain our $/ILS forecast at 3.60, 3.55 and 3.45 in 3, 6 and 12 months. These forecasts imply /ILS at
4.97, 4.97 and 4.83 in 3, 6 and 12 months. The $/ILS GSDEER is 3.99 and /ILS GSDEER is 4.74.
Motivation for Our FX View: We continue to hold a long-term (structural) constructive view on the Shekel on the back of
a strong growth outlook and an improving current account. The Q2 current account print came in at US$1.8bn (2.5% of
GDP), roughly unchanged from Q1 (US$1.9bn), and gas production should reduce energy imports further in 2H2013.
Appreciation pressures are therefore unlikely to disappear. The September surprise cut may provide some temporary relief
but the BoI is running out of ammunition to weaken the currency. FX interventions have also remained relatively moderate
due to the fiscal costs associated with a large stock of FX reserves. Furthermore, we think the BoI will become less sensitive
to appreciation pressures in 2014 as the global recovery becomes better entrenched and exports pick up.
Monetary Policy and FX Framework: The Bank of Israel enjoys operational independence and targets inflation of 1%3%yoy. From October 2011 onwards, the Monetary Committee has set the policy rate (previously set by the governor), with
a view to keeping inflation within the target band.
Growth/Inflation Outlook: Headline inflation fell to 1.3%yoy in August but remains within the BoIs 1%-3% inflation
target. As a result, the booming housing market is the main constraint on monetary policy at this juncture. On the growth
front, there has been a significant pick-up in domestic demand. GDP growth accelerated to 4.9%qoq ann. in 2013Q2, from
2.7% in Q1, and the unemployment rate fell to 6.1% in August, an historical low. We continue to forecast 3.6% growth in
2013, up from 3.2% in 2012.
Monetary Policy Forecast: The BoI had room to ease going into late 2011 as a result of the improved domestic inflation
outlook (thanks to relatively benign food inflation and cuts in regulated prices) and previous policy tightening. Focusing on
slowing global growth and rising uncertainty, the Bank has cut rates by 225bp since September 2011 (from 3.25% to 1.00%)
However, we now think that the easing cycle has ended and forecast rates on hold until end-2013 due to the constraint
imposed by the booming housing market and the strong improvement in the labour market and domestic demand.
Fiscal Policy Outlook: The budget deficit widened to around 5% of GDP in 2009, mainly as a result of the economic
slowdown. Despite improving fiscal dynamics up to mid-2011, the deficit has widened over recent quarters and the deficit
for 2012 is around 4.5%. We expect the governments new 2013-14 budget to change this trajectory.
Balance of Payments Situation: The current account surplus narrowed to around 0.3% of GDP in 2012, from 1.3% in
2011 and 3.1% in 2010. However, we expect this trend to reverse in 2013 as global growth picks up and as natural gas
production reduces energy imports.
Things to Watch: Ongoing political developments in the Middle East, as well as the global growth backdrop, should be
monitored closely.
Kasper Lund-JensenKasper Lund-Jensen
Israel: BBoP vs. Current Account
$/ILS
5.0
10%
4.8
8%
4.6
6%
4.4
4%
4.2
2%
4.0
0%
3.8
-2%
3.6
-4%
3.4
Spot
-6%
3.2
GSDEER
-8%
3.0
% GDP
4-qtr ma
97
99
01
03
05
07
09
11
13
15
-10%
CA
BBoP
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
17
October 10, 2013
Norwegian Kroner
FX Forecasts: We maintain our EUR/NOK forecast at 7.70, 7.50 and 7.30 in 3, 6 and 12 months. This equates to 5.58, 5.36
and 5.21 for the USD/NOK rate. The NOK looks undervalued vs the Euro at current levels, according to our GSDEER
valuation of 5.62, reflecting Norway's terms-of-trade gains. However, because Norway keeps the bulk of its oil revenues
offshore, the Kroner is unlikely to erode this undervaluation substantially.
Motivation for Our FX View: Despite dovish statements from the Norges Bank, we continue to expect the NOK to
strengthen against the EUR in the medium term. With growth remaining resilient and a strong external balance, the NOK
is fundamentally supported. In the medium to long term, with a closed output gap, strong credit growth and rising house
prices, the Norges Bank is likely to have to tolerate more currency strength and hike rates relative to an on hold ECB.
Rising inflation pressures in recent months increase the likelihood of tighter monetary policy. Consequently, we expect
EUR/NOK to reach the recent lows again.
Growth/Inflation Outlook: Norwegian (mainland) GDP was robust during most of 2012, but with some easing of
momentum towards the end of 2012. Norwegian activity improved in early 2013, but has struggled to improve further.
Manufacturing output and the PMI have been relatively robust recently, while Norges Banks Regional Network survey
has been weaker. Our Norwegian CAI averaged around 2.5% (annualised) in Q2 but has recently dipped below 2%.
Inflation has been subdued in Norway for some time, with CPI-ATE range-bound at around 1%-1.5% over the past year.
CPI-ATE inflation rose sharply in both July and August (by a combined 1.1pp), but retracted about half of this increase in
September. CPI-ATE inflation now stands at 1.7%.
Monetary Policy Forecast: Norges Banks March and June update to its policy rate path was on the dovish side,
pushing out the commencement of hikes from mid-2013 to the autumn 2014. Owing to the sharp recent rise in inflation,
Norges Bank revised the near-term policy rate path flat (suggesting near-term balanced risk) and Norges Bank now
expects hikes by the summer of 2014. We maintain our view of no near-term cuts and continue to expect Norges Bank to
commence hiking in May 2014.
Fiscal Policy Outlook: Discretionary fiscal policy is likely to be somewhat expansionary in 2013. The current ongoing
discussion to establish a centre-right coalition following the recent election makes the fiscal policy outlook more
uncertain than usual.
Balance of Payments Situation: As the world's fifth-largest oil exporter, Norway enjoys a healthy current account
surplus, standing at 12.8%; nonetheless, the BBoP turned negative in 2013 after having been in positive territory for three
years.
Things to Watch: The NOK TWI has fallen after reaching record highs near the start of 2013. NOK TWI will be important
to watch given the Norges Banks sensitivity to excessive currency strength.
Thomas Stolper and Lasse Holboell W. Nielsen
Norway: BBoP vs. Current Account
EUR/NOK
10
20%
15%
% GDP
4-qtr ma
10%
5%
7
0%
-5%
5
4
Spot
GSDEER
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
-10%
-15%
CA
BBoP
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
18
October 10, 2013
Polish Zloty
FX Forecasts: We maintain our EUR/PLN forecasts at 4.25 in 3 and 6 months, and 4.20 in 12 months, respectively. Given
our USD/EUR forecast, this implies USD/PLN at 3.08, 3.04 and 3.00. Current GSDEER for EUR/PLN is 3.62, indicating a
12.5% undervaluation against the Euro. USD/PLN GSDEER is 3.05.
Motivation for Our FX View: We expect the Zloty to remain sensitive to the global rates outlook. But the recent
improvement in the current account, a stronger growth outlook and more dovish ECB and the Fed should support the
Zloty. That said, expectations of an eventual end to monetary stimulus in the US, lower demand for EM assets, gradual
FX deleveraging and a recovery in domestic demand which would reverse the recent CA improvement will limit the
Zlotys appreciation potential. In the longer term, we see scope for more appreciation as the fundamental factors,
especially stronger growth, support the Zloty.
Monetary Policy and FX Framework: The PLN is a freely-floating currency. However, the NBP would intervene in the
FX market if the Zloty were to move rapidly in either direction owing to external factors, although it should tolerate
gradual moves. The capital market is fully liberalised and the NBP maintains an inflation target of +2.5% (+/- 1%).
Growth/Inflation Outlook: Growth recovered in 2Q2013 and the economy expanded by 0.4%qoq. We expect growth to
pick up further in 2H2013, extending into 2014, on stronger external and, later, domestic demand. Inflation should stay
below or close to the target until end-2014.
Monetary Policy Forecast: We expect the MPC to stay on hold for the rest of 2013 and well into 2014. But the
improving growth prospects and a faster than previously expected return to target inflation may prompt some early calls
for rate hikes in 2014.
Balance of Payments Situation: The current account moved into surplus in 2Q2013 as weaker domestic demand
reduced imports and exports benefited from stronger DM growth. This improvement should persist in 2H2013, providing
some support for the Zloty. International reserves are high and tail-risks are limited by the two-year SDR22bn Flexible
Credit Line from the IMF, renewed in January 2013. Foreign investors returned to the debt market in the summer, but
continued repayments of foreign loans, including by banks, will reduce net capital inflows.
Fiscal Situation: The 2013 budget was revised to reflect revenue shortfalls and allow a larger deficit; the first debt warning
threshold was suspended to avoid pro-cyclical cuts and an additional hit to growth. The government plans to take over debt
holdings of privately run pension funds to reduce public debt and support revenues, and to avoid hitting the second debt
threshold and legally-mandated fiscal cuts ahead of the next elections in 2015.
Things to Watch: Plans to take over pension fund assets may weigh on the local markets and PLN volatility. But the
impact would be the largest for the equity market, especially if the pension funds are forced to sell some of their equity
holdings.
Magdalena Polan
Poland: BBoP vs. Current Account
EUR/PLN
5.10
6%
4.60
4%
4.10
2%
3.60
0%
3.10
-2%
2.60
-4%
Spot
2.10
1.60
% GDP
4-qtr ma
-6%
GSDEER
95
97
99
01
03
05
07
09
11
13
15
-8%
CA
BBoP
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
19
October 10, 2013
Russian Ruble
FX Forecasts: We maintain our 3- and 6-month forecast for the Ruble basket at 37, and our 12-month view at 38. This
implies USD/RUB at 31.6, 31.4 and 32.2. The GSDEER value for USD/RUB is 39.0 and for EUR/RUB is 46.4.
Motivation for Our FX View: We expect the Ruble to strengthen modestly in the next 3 months both due to seasonal
factors (a stronger current account in the winter months) and because we expect domestic demand growth to improve
somewhat, implying that the large outflows of capital should become more measured. Oil prices should remain close to
current levels in the short run. In the medium term, however, we expect a declining interest rate premium, slightly lower
oil prices and a still sizable inflation premium to lead to some depreciation in the currency. That said, with growth (on our
forecasts) likely to pick up into next year, the depreciation should be somewhat measured.
Monetary Policy and FX Framework: The framework has shifted towards a flexible exchange rate (free float
beginning in 2015) and focus on inflation (5%-6% in 2013 and 5%+/-1.5% in 2014). The CBR's intervention band against
the US$0.55 + EUR0.45 basket is now at RUB32.3-RUB39.3; although policy has been to widen the band over time, no
near-term widening is expected. However, the position of the corridor shifts by 5 Kopecks whenever targeted
interventions accumulate to US$400mn and this threshold may decrease. The CBR caps money market rates with its 6.5%
FX swap rate, limiting spikes above the 5.5% main policy rate. Recently, the CBR introduced another term lending facility
against non-marketable collateral; the liquidity injection from the upcoming October 14 auction could be Ruble-negative.
Growth/Inflation Outlook: Growth indicators as far as investment and exports are concerned have been weak.
However, with the global cycle becoming stronger, we expect the Russian economy to accelerate somewhat. Inflation
peaked in 1H2013, but fell to 6.1% in September due to food prices and is expected to decline to 5.8% by year-end.
Monetary Policy Forecast: Headline inflation is declining, credit expansion is coming down and the economy has
slowed significantly. However, the CBR rightly points out that the output gap remains pretty closed, inflation expectations
have not declined recently, the labour market remains tight and inflation has so far been above target. Hence, it has not
lowered rates. We think rate decisions will be more data-dependent from here. Our view is that the global cycle will lead to
an acceleration in Russia and there will be no output gap; we therefore expect rates to remain on hold.
Fiscal Policy Outlook: The non-oil deficit has been reduced by 1pp of GDP. We expect the pace of fiscal tightening to
slow and fiscal policy to become more growth-supportive.
Balance of Payments Situation: Based on our Commodity Strategists' positive view on oil prices, we expect the
current account to accumulate a surplus of 2% of GDP in 2013, down from 4.1% in 2012. However, the trade balance in
goods and services should remain close to 6% of GDP and not much changed from last year.
Things to Watch: We expect the Ruble to react positively to any pick-up in activity. Core inflation as measured by the
CBR should not decline, supporting our rate forecast.
Clemens Grafe and Andrew Matheny
Russia: BBoP vs. Current Account
$/RUB
20%
40
35
15%
30
25
% GDP
4-qtr ma
CA
BBoP
10%
20
5%
15
10
5
0
0%
Spot
GSDEER
-5%
95
97
99
01
03
05
07
09
11
13
15
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
20
October 10, 2013
South African Rand

FX Forecasts: We maintain our 3-, 6- and 12-month forecasts for $/ZAR at 10.20, 10.40 and 10.60. This implies /ZAR at 14.1,
14.6 and 14.8. The current $/ZAR GSDEER is 7.22 and /ZAR GSDEER is 8.58.
Motivation for Our FX View: Sovereign ratings downgrades, a broad-based sell-off in EM assets and industrial action
have seen the ZAR underperform over most of 2H2012 and 1H2013. Given the high current account and the high beta
nature of South Africa, the ZAR sell-off has been particularly rapid and pronounced, even against EM peers. A further
deterioration in financial inflows (and ZAR depreciation) remains a key risk, particularly until the current account deficit
narrows further. Despite the relatively low level of external leverage, the limited impact of significant previous ZAR
depreciation (around 26% in real trade-weighted terms since January 2011 and 12% YTD) on the external rebalancing
increases the risk of dislocation in financial flows. Over a medium- to long-term horizon, we continue to expect gradual ZAR
depreciation, in line with inflation and productivity differentials.
Monetary Policy and FX Framework: The South African Reserve Bank is operationally independent and sets its policy
rate to keep CPI inflation within the official 3%-6%yoy target and, secondarily, to support growth and promote financial
stability. The key policy rate is the 2-week repo rate.
Growth/Inflation Outlook: Softening consumption and low consumer and business confidence depressed domestic
demand and overall growth in 1H2013. We continue to expect a sequential recovery over 2H2013, but overall growth is likely
to remain weak until global growth picks up more visibly (in 2014, according to our global forecasts). Despite the negative
output gap, which helps to limit core inflation pressures, a weaker ZAR will pass through to both import and core prices.
Hence, we expect headline inflation to remain in breach of the SARBs (6%) upper target boundary for a few months before
retracing towards the turn of the year.
Monetary Policy Forecast: Although the SARB remains concerned about growth, we see little room for further cuts
(given the inflation outlook) and expect rates to remain on hold, at 5.0%, through to mid-2015.
Fiscal Policy Outlook: Fiscal policy remains accommodative, but the 2013 Budget reiterated a commitment to ongoing
consolidation, taking the deficit to c.3.0% over the four-year policy horizon.
Balance of Payments Situation: The current account deficit widened rapidly over 2012, owing to a combination of
weaker external demand, domestic supply disruptions and a deteriorating terms of trade. There has been some
sequential rebalancing of the current account deficit since late 2012, on the back of ZAR depreciation and softening
domestic absorption. But, ultimately, we expect net exports to remain in sizeable deficit until the real effective exchange
rate depreciation improves external competitiveness and tame imports. An expected gradual pick-up in global growth
from 2H2013 (in line with our global growth forecasts) will also be helpful. Recent price falls in key commodity exports
pose a risk that CA rebalancing takes longer than we initially expected.
Things to Watch: Global monetary policy, portfolio inflows and domestic political / labour market developments.
JF Ruhashyankiko
South Africa: BBoP vs. Current Account
$/ZAR
8%
12
10
Spot
6%
GSDEER
4%
% GDP
4-qtr ma
CA
BBoP
2%
0%
-2%
4
-4%
-6%
-8%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
-10%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
21
October 10, 2013
Swedish Krona
FX Forecasts: We maintain our EUR/SEK forecast at 8.40, 8.30 and 8.30 in 3, 6 and 12 months. This implies USD/SEK at
6.09, 5.93 and 5.93. Current GSDEER for EUR/SEK is 7.95.
Motivation for Our FX View: The SEK has traded in a reasonably wide range in recent months, between 8.5 and 8.9
since June. Despite this volatility, we continue to see the SEK strengthening from here as activity improves and inflation
troughs. The dynamics behind SEK strength remain in place: recent data suggest an improving outlook, Swedens
current account remains robust and, contingent on a gradual improvement in domestic and global conditions, the
Riksbank would likely accommodate EUR/SEK moving lower.
Monetary Policy and FX Framework: A flexible inflation targeter, responding to output fluctuations over and above
what they imply for future inflation. The Riksbank's objective is to keep inflation at around 2%. A flexible FX regime.
Growth/Inflation Outlook: Since around November last year, the business surveys have improved robustly; recently,
the September PMI rose sharply by close to 4pt and is now at 56; equivalent to growth of around 0.6qoq/0.7%qoq (nonannl.). The KI/NIER survey has also been robust and currently points to growth of around 0.4%qoq (non-annl.) and our
CAI now points to 2% growth (annl.). Q1 and Q2 GDP printed well below growth implied by the business surveys. During
2013, domestic demand has appeared robust, but external developments have posed headwinds to growth. As external
factors improve, we continue to expect acceleration in Swedish GDP. CPIF inflation in Sweden has hovered around a
subdued level of 1% over the past year. We expect inflation to rise slowly from its current subdued level and move
towards 2% during the second half of 2015.
Monetary Policy Outlook: The Riksbank cut the policy rate from 2% in December 2011 to 1% during the course of
2012, but has been on hold so far in 2013, including at the recent September meeting. The Riksbank adopted a more
dovish repo rate path at its April meeting, pushing out its planned hikes to the second half of 2014. The recent September
meeting saw a small increase in the repo rate path, suggesting that near-term risks are declining, but are still skewed to
the downside. There was no change to the expected start of the hiking cycle. We continue to expect hikes from mid-2014.
Fiscal Policy Outlook: The fiscal position remains very healthy. The governments 2014 budget is somewhat
expansionary and we pencil in a fiscal easing of around 0.5% of GDP next year.
Balance of Payments Situation: On a trend basis, Sweden's current account surplus remains relatively robust at 5.9%
of GDP. The BBoP surplus stands at 5.8% of GDP on a trend basis. Other things equal, the BBoP surplus is positive for the
SEK.
Things to Watch: Given that Sweden is a high beta economy to global growth, the momentum of our proprietary GLI
is important to watch with regards to the performance of the external sector.
Thomas Stolper and Lasse Holboell W. Nielsen
Sweden: BBoP vs. Current Account
EUR/SEK
12
25%
11
20%
10
15%
% GDP
4-qtr ma
CA
BBoP
10%
8
5%
0%
6
Spot
5
4
GSDEER
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
-5%
-10%
90 92 94 96 98 00 02 04 06 08 10 12 14
22
October 10, 2013
Swiss Franc
FX Forecasts: We maintain our forecasts for EUR/CHF at 1.25, 1.28 and 1.28 in 3, 6 and 12 months. This equates to
USD/CHF at 0.91, 0.91 and 0.91. EUR/CHF GSDEER is 1.36 and USD/CHF GSDEER is 1.14.
Motivation for Our FX View: As Euro area tensions declined in 2Q2013, the flows that maintained the intense
appreciation pressure on the 1.20 SNB floor have moderated. The very low, and on some occasions even negative,
nominal return on cash in Switzerland has made the local currency less attractive. In addition, with Euro area assets
recovering in early 2013, we have seen CHF sell-offs for the first time since the floor was established in September 2011.
Anecdotal evidence suggests some safe haven inflows are reversing at the moment given that the Euro area tensions are
abating. Moreover, from a fair value point of view, the CHF strength should eventually reverse, as our forecasts indicate.
However, offsetting factors may limit the speed of the move, including pressures from the unwinding of legacy carry
trades, including mortgages in Central Europe and CHF-funded long-dated structured products. The Swiss balance of
payments situation also remains extremely supportive of the Franc.
Monetary Policy and FX Framework: The SNB targets inflation, with a ceiling on CPI set at less than 2% pa. Usually,
the SNB uses 3-month Libor as its policy instrument. However, to prevent deflation, the SNB has successfully enforced a
minimum rate for EUR/CHF at 1.20, and has said it is prepared to buy FX in unlimited quantities to defend it.
Growth/Inflation Outlook: GDP growth was 0.5%qoq annualised in Q2. The PMIs have been steady and inflation has
remained in negative territory, although the KOF leading indicator has shown consistent improvement over the last two
months.
Monetary Policy Forecast: We expect the SNB to maintain the minimum level for the EUR/CHF at 1.20 and for that rate
to remain in place until the risks of deflation have subsided. At that point, we would expect the Bank to switch back to
using interest rates as its main policy instrument.
Fiscal Policy Outlook: Switzerland has a low debt-to-GDP ratio; we forecast a budget surplus of 0.8% of GDP in 2013.
Balance of Payments Situation: The Swiss current account surplus remains strong, owing to a surplus on all
components. As a result, the NBoP remains in surplus despite negative net FDI flows. Switzerlands portfolio flow data is
complicated by its position as an international financial centre.
Things to Watch: While the risk of further SNB action has diminished, in particular a re-peg, owing to the stability in
inflation, it remains important to monitor SNB commentary for renewed concerns over deflation or the effect of CHF
strength.
Thomas Stolper
Switzerland: BBoP vs. Current Account
EUR/CHF
20%
2.1
2.0
Spot
1.9
GSDEER
1.8
15%
10%
5%
1.7
0%
1.6
1.5
-5%
1.4
-10%
1.3
-15%
1.2
1.1
% GDP
4-qtr ma
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-20%
CA
BBoP
00 01 02 03 04 05 06 07 08 09 10 11 12 13
23
October 10, 2013
Turkish Lira
FX Forecasts: We maintain our 3-, 6- and 12-month forecasts for $/TRY at 2.10, 2.20 and 2.40. This implies /TRY at 2.90,
3.08 and 3.36 in 3, 6 and 12 months. The current $/TRY GSDEER is 2.43 and /TRY GSDEER is 2.89.
Motivation for Our FX View: The TRY is undermined by large external imbalances, both stock (net foreign liabilities)
and flow (current account deficit). The recent re-pricing of emerging market assets has resulted in some TRY weakness.
The CBRT has launched a number of tightening measures, using TRY liquidity measures and FX interventions to help
manage the excessive volatility of the currency. However, the CBRTs reserves are not sufficient to withstand persistent
external shocks and further FX adjustment will be necessary to help ensure long-term external sustainability, as core
central banks move closer to normalising monetary policy over the next few years.
Monetary Policy and FX Framework: The CBRT formally adopted inflation targeting in 2006. The current mediumterm target is 5.0% for 2013.
Growth/Inflation Outlook: Growth expanded robustly in 2011 (8.5%) but the economy has since rebalanced through a
slowdown in investment demand and a weaker TRY. The annual GDP growth rate was at 2.2% in 2012. But, with a looser
domestic policy mix and relative external normalisation, growth should accelerate towards 4.5% in 2013. Inflation rose to
10.5% at end-2011. With relatively well-behaved commodity prices, but less favourable base effects and a reacceleration
in domestic demand, we expect inflation to come in at 7.8% at end-2013 and 8.3% at end-2014.
Monetary Policy Forecast: Faced with a reacceleration in capital inflows, weakness in global growth and policy easing
by core DM central banks, the CBRT cut its policy rates and delivered macroprudential tightening through ROC and RRR
hikes over most of 2H2012 and 1H2013. However, in response to excessive TRY volatility (generated by domestic political
uncertainty) and a broad-based re-pricing of EM risk over the last few weeks, the CBRT has changed tack again, launching
an Additional Monetary Tightening (AMT) program. The program combines rate hikes with FX interventions. However,
we expect the CBRT to hike policy rates further, by 225bp in 2014.
Fiscal Policy Outlook: Following a widening in the deficit to 5.5% of GDP in 2009, the government introduced
corrective measures in late 2010. Thanks to one-off items and robust domestic activity, the deficit fell further to -1.5% in
2012. In 2013, we expect fiscal policy to remain relatively benign, with a deficit in a 2% range. Further widening is likely in
2014, in the run-up to municipal and presidential elections.
Balance of Payments Situation: The current account deficit widened to 6.4% in 2010, peaked at 10.6% in 1Q2011 and
is currently running close to 6.8% of GDP (12-month rolling). We expect the deficit to widen towards 7.5% of GDP by end2013.
Things to Watch: External monetary policy developments and domestic political uncertainty.
Ahmet Akarli
Turkey: BBoP vs. Current Account
$/TRY
4%
2.5
Spot
2.0
2%
GSDEER
% GDP
4-qtr ma
0%
-2%
1.5
-4%
1.0
-6%
-8%
0.5
CA
-10%
0.0
95
97
99
01
03
05
07
09
11
13
15
-12%
BBoP
93
95
97
99
01
03
05
07
09
11
13
24
October 10, 2013
Ukrainian Hryvnia
FX Forecasts: We maintain our forecasts for the UAH at 9.2, 10.3 and 10.3 against the USD in 3, 6 and 12 months. This
implies EUR/UAH at 12.7, 14.4 and 14.4 in 3, 6 and 12 months.
Motivation for Our FX View: The NBUs currency peg has been under pressure since last Autumn. Ukraine has
requested IMF aid and two staff missions have visited Kiev this year. Although we think negotiations will be difficult, we
nonetheless expect Ukraine to reach a deal with the IMF in the coming months. This would set the stage for the NBU to
devalue the UAH by around 30% to 10.3. The IMF will likely request that Ukraine move towards a flexible exchange rate
regime and we estimate that a 30% devaluation would be required to close the current account. Our base case is for an
external adjustment in Q4, with a risk that this is pushed back further. Thus, we construct our forecasts probabilistically.
Monetary Policy and FX Framework: Monetary policy has been focused on maintaining the nominal exchange rate
peg. However, reserves have been continuously under pressure in the last two years, falling from US$38.4bn in April
2011 to US$21.6bn in September 2013 (2.6 months of imports). While the NBU has been able to loosen monetary policy
since the winter without accelerating the loss of reserves, base money growth of 14%yoy in an economy that has been
contracting will, in our view, ultimately add to pressure on the exchange rate sooner or later. The authorities have
introduced restrictions on FX transactions, such as a 50% export surrender requirement, to stem the decline in reserves.
Growth/Inflation Outlook: We forecast 2013 growth at -1%, after +0.2% growth in 2012. Output has declined as a result
of a credit crunch, the fact that fiscal spending has been restricted by access to funding, and a deterioration in external
demand. We expect negative growth in the short run, followed by a rebound in investment and exports. Inflation has
been running at close to zero all year, according to the official statistics, with no adjustment to utility tariffs despite rising
fuel costs, an appreciating currency against its trading partners in real terms and a shrinking economy. Our
growth/inflation view depends to a large extent on the magnitude and timing of the external adjustment.
Monetary Policy Forecast: Current monetary policy is almost entirely determined by the currency peg. Money market
rates reflect liquidity conditions, which are not bound by policy interest rates. With reserve losses likely to accelerate in
H2, we expect short-term rates to rise once more, as the NBU is obliged to tighten or allow the currency to adjust.
Fiscal Policy Outlook: The governments budget for 2013 plans for a deficit of over 3% and the IMF expects an overall
government deficit of 4.5% (including a 2% deficit for Naftogaz). Longer term, with two-thirds of its debt in hard currency
and a devaluation on the horizon, Ukraines debt dynamics are worsening. Debt/GDP could approach 45% in 2013.
Balance of Payments Situation: Under the currency peg, the current account deficit has widened as Ukraines terms
of trade have deteriorated. At around 8% of GDP and with reserve import cover now below three months, we think the
currency peg is unsustainable, particularly in light of US$5.7bn in NBU repayments coming due to the IMF in 2013.
Things to Watch: Developments with IMF negotiations, government debt redemptions, bank deposits and FX reserves.
Andrew Matheny
Ukraine: BBoP vs. Current Account
20%
15%
% GDP
4-qtr ma
10%
5%
0%
-5%
-10%
CA
BBoP
02 03 04 05 06 07 08 09 10 11 12 13
25
October 10, 2013
Americas
Argentine Peso
FX Forecasts: We maintain unchanged our 3-, 6- and 12-month $/ARS forecasts of 6.15, 6.53 and 7.36. This implies
/ARS at 8.49, 9.14 and 10.30 in 3, 6 and 12 months. The current GSDEER is 3.44 for $/ARS and 4.09 for /ARS.
Nevertheless, our valuation model uses the official inflation index, which is thought to have significantly underestimated
actual inflation since early 2007. If the higher, non-government inflation estimates are used, the undervaluation of the
ARS virtually disappears.
Motivation for Our FX View: The Central Bank seems to be accommodating a faster depreciation of the currency. The
ARS/USD depreciation drift accelerated to a monthly average of 2.4% in 3Q2013 (an annualised rate of 33%yoy), significantly
higher than the average of 1.5% in the previous 12 months. The USD has gained 23% against the ARS in the past 12 months
(up from 21% in the 12 months to August). Regardless of the acceleration in the depreciation in the bilateral parity, the
annual drift is still below the inflation rate (25.4% in August, according to non-government estimates). The hefty premium
(65%) of the implied $/ARS from blue-chip swap transactions reflects growing FX pressures.
Monetary Policy and FX Framework: The Central Bank justifies monetary policy through quantitative targets on M2,
but in practice it is subject to budgetary decisions, including debt servicing. The 2013 monetary program is sufficiently
lax, with a M2 growth target of 27%yoy. The Central Bank intervenes heavily in the FX market. The Bank partially mops
up the excess liquidity by issuing short-term notes (Lebacs and Nobacs).
Growth/Inflation Outlook: Real GDP growth accelerated to a surprising 8.3%yoy (+2.6%qoq sa) in 2Q2013, from 3%yoy
in 1Q2013. We expect official figures to show real GDP growth of 5.3% in 2013 (up from 1.9% in 2012), even when high
frequency indicators are not consistent with these rates. The government is thought to continue to under-report inflation:
official figures put headline inflation at 10.5%, while non-government estimates put it at around 25%.
Monetary Policy Forecast: The Central Bank has a weak track record for inflation control (monetary policy is
subordinated to fiscal priorities). The Bank transferred US$21.9bn in reserves to the government in 2011-12 and is
expected to transfer another US$18bn in 2013-14.
Fiscal Policy Outlook: The fiscal stance has been eroded: the overall fiscal deficit worsened to 2.6% of GDP in 2012
from 1.7% of GDP in 2011 and a 0.2% of GDP fiscal surplus in 2010. The central government increasingly relies on intrapublic financing to mask the growing deficit.
Balance of Payments Situation: The authorities trade protectionist strategy has led to a significant decline in imports.
A growing deficit in the energy account will likely erode the positive contribution from the trade balance.
Things to Watch: The performance of the economy, and legal injunctions in the US related to the debt holdouts.
Mauro Roca
Argentina: BBoP vs. Current Account
$/ARS
12%
7.0
6.0
Spot
GSDEER
5.0
10%
8%
6%
4.0
4%
3.0
2%
0%
2.0
-2%
1.0
0.0
% GDP
4-qtr ma
CA
BBoP
-4%
91 93 95 97 99 01 03 05 07 09 11 13 15
-6%
95
97
99
01
03
05
07
09
11
13
26
October 10, 2013
Brazilian Real
FX Forecast: We are revising our 3-, 6- and 12-month $/BRL forecasts to 2.25, 2.30 and 2.40 from 2.35, 2.35 and 2.45,
respectively. This implies /BRL at 3.11, 3.22 and 3.36 in 3, 6 and 12 months respectively. The current $/BRL GSDEER is
2.92 and /BRL GSDEER is 3.47.
Motivation for Our FX View: The balance of risks to our near-term BRL/USD 2.25 forecast is skewed towards a
stronger BRL, particularly if the global backdrop and the EM FX trading environment remains constructive, but poor
domestic sentiment, the weak macro picture and the authorities preference for a competitive currency should limit the
upside. The authorities have intervened repeatedly and heavily in the FX market since end-May (roughly US$60bn,
mostly via USD swaps). Under pressure to anchor the drifting BRL, the authorities announced on August 22 a sizeable
intervention program until the year-end (offer of up to US$2bn in Dollar swaps and US$1bn in Dollar repos per week).
Monetary Policy and FX Framework: The 2012 IPCA inflation target was set at a generous 4.5% 2.0%. The MPC
conducts monetary policy chiefly by setting the SELIC policy rate. The managed floating FX regime has been marked by
large, frequent and discretionary interventions in the spot and derivatives FX markets.
Growth/Inflation Outlook: Real activity grew a higher than expected 1.5%qoq sa in 2Q2013 but was driven mostly by
transient factors. We expect some payback in 2H2013: activity is likely to post a small contraction at the margin in 3Q and
see just a mild expansion in 4Q. Overall, we expect real GDP to grow just 2.6% in 2013 (the third consecutive year of
below-trend growth) and 2.3% in 2014. Inflation remains high and disseminated: core inflation is still tracking above
6.0%yoy, with services inflation running at a high 8.7%yoy. Inflation expectations remain misaligned from the inflation
target all the way to 2015. We expect inflation to end 2013 at 5.8% (i.e., significantly above the 4.50% target).
Monetary Policy Forecast: The MPC has been hiking since April. We expect the Central Bank to hike the Selic by
another 50bp in October and by at least another 25bp at the November meeting, taking the Selic to at least 9.75% by
year-end 2013 (from 7.25% in March). Given the stickiness of inflation and the still significant projected deviation of
inflation from the 4.50% target as far ahead as 3Q2015, the MPC may be forced to hike more and drive the Selic to double
digits despite the economic and political costs of doing so.
Fiscal Policy Situation: The fiscal picture has deteriorated. The consolidated public-sector primary fiscal surplus
declined from 3.1% of GDP in 2011 to 2.4% of GDP in 2012, and is expected to fall further to 1.5%-2.0% of GDP in 2013.
Balance of Payments Situation: The current account deficit has continued to widen, from 2.2% of GDP in 2011 to 2.4%
of GDP in 2012, and is expected to widen further to 3.8% of GDP in 2013. The overall balance of payments recorded a
mild US$18.9bn surplus in 2012 (down from the large US$58.6bn surplus in 2011 and an average annual surplus of over
US$50bn during 2009-2011). Hence, balance of payments flows are no longer a major driver of BRL appreciation.
Things to Watch: The real business cycle forward momentum, and the monetary and FX intervention policy stance.
Alberto M. Ramos
Brazil: BBoP vs. Current Account
$/BRL
4.0
3.5
3.0
8%
Spot
6%
% GDP
4-qtr ma
CA
BBoP
GSDEER
4%
2.5
2%
2.0
0%
1.5
-2%
1.0
-4%
0.5
0.0
92 94 96 98 00 02 04 06 08 10 12 14 16
-6%
96
98
00
02
04
06
08
10
12
14
Source: Haver Analytics, Goldman Sachs Global Investment Research.
27
October 10, 2013
Canadian Dollar
FX Forecasts: We maintain our $/CAD forecasts at 1.05, 1.03 and 1.00. This implies EUR/CAD at 1.45, 1.44 and 1.40. The
current GSDEER for $/CAD is 1.16 and for EUR/CAD is 1.38.
Motivation for Our FX View: Over 2013 and 2014, we expect Canada to broadly match the US in relative growth
terms, which would generally be neutral for the CAD. But we also continue to expect broad USD weakness, largely
resulting from persistently wide twin deficits. In contrast, strong portfolio flows since the crisis have kept Canadas BBoP
relatively more positive. The Dollar will also likely continue to be weighed on by the Fed's monetary stance relative to
elsewhere: open-ended asset purchases were announced in September 2012 and we expect them to continue into
3Q2014. In its September statement, the Bank of Canada (BoC) noted that higher mortgage interest rates were a positive
contributor to the ongoing correction of household imbalances. This reinforces our view that the BoC will not attempt to
lean against any spillovers from changes in Fed policy. In the near term, the continued cyclical weakness in the global
economy and domestic household imbalances pose downside risk to the CAD.
Monetary Policy and FX Framework: The BoC operates an inflation targeting regime (2% within a 1%-3% range), with
a generally flexible stance on the currency. In the past, the BoC has only commented on FX during periods of disruptive
FX price action in terms of levels and/or the speed of a move. In July, the Bank dropped any explicit mention of the
Canadian Dollar from its policy statement.
Growth/Inflation Outlook: The BoC continues to expect an acceleration to above-trend growth in 2014 and our
forecast supports this view based on strengthening private demand in the US. The inflation picture has been very benign,
with headline and core inflation near the lower end of the target range.
Monetary Policy Forecast: The BoC kept rates at 1.00% in September, maintaining its slight tightening bias by stating
that over timea gradual normalization of policy interest rates can also be expected. Given the fragile global economy
and ongoing decline in fixed investment, we believe the BoC will remain on hold through 2015. Recent communication
has focused on the need for patience while waiting for the considerable monetary stimulus already in place to take effect.
Fiscal Policy Outlook: In the 2013 budget announcement, the deficit for FY2012/13 was projected to be C$25.9bn, or
-1.5% of GDP. The budget foresees a deficit of C$18.7bn (1.1% of GDP) for FY2013/14, with continuing reductions in the
following years, aiming for a surplus in FY2015/16.
Balance of Payments Situation: The current account balance remains in deficit, but the BBoP picture remains a bit
better because post-crisis portfolio inflows have been strong.
Things to Watch: Cyclical domestic growth momentum continues to be an important factor, in addition to exposure to
the US business cycle. We are also watching the main drivers of the CAD, including risk sentiment and the oil outlook, as
well as speculative net positioning, which has recently moderated somewhat but remains short.
Robin Brooks and Michael Cahill
Canada: BBoP vs. Current Account
$/CAD
4.0%
1.7
1.6
1.5
Spot
3.0%
GSDEER
2.0%
CA
BBoP
1.0%
1.4
0.0%
1.3
-1.0%
1.2
-2.0%
1.1
-3.0%
1.0
-4.0%
0.9
% GDP
4-qtr ma
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-5.0%
90 92 94 96 98 00 02 04 06 08 10 12
28
October 10, 2013
Chilean Peso
FX Forecasts: We maintain our 3-, 6- and 12-month forecasts at $/CLP 520, 530 and 535 respectively. This implies /CLP
at 718, 742 and 749 in 3, 6 and 12 months. The current $/CLP GSDEER is 443 and /CLP GSDEER is 527.
Motivation for Our FX View: Weaker growth against a backdrop of sluggish external demand, lower terms of trade
and benign inflation opens the door for rate cuts in the coming months. The possibility of easier domestic monetary
conditions combined with large external imbalances undermines the Pesos fundamentals, validating the depreciation of
the CLP observed over the last several months and tilting its short-term outlook towards moderate further currency
weakness. Like other EM currencies, the CLP may come under further pressure in the short term if markets do not react
smoothly to the potential tapering by the US Fed.
Monetary Policy and FX Framework: The Central Bank targets inflation (3.0%1.0%) under a free-floating FX regime.
FX market intervention occurs seldom and only under exceptional circumstances. Disciplined rules-based fiscal execution
provides additional room for manoeuvre to calibrate monetary policy.
Growth/Inflation Outlook: Real GDP grew 4.3%yoy in 1H2013, below estimates of potential growth and significantly
below the 5.6% print recorded in 2012. This deceleration was largely driven by a slowdown in investment spending.
Domestic consumption remains buoyant, however, supported by the solid expansion of the real wage bill of the
economy. Inflation dynamics remain benign: headline and core measures have stayed significantly below the target for
an extended period of time. Persistently low inflation prints have recently pulled inflation expectations down from the
mid-point of the target range. We expect inflation to converge to the 3.0% target by 2H2014.
Monetary Policy Forecast: The Central Bank has held the policy rate unchanged at 5.00% since the February 2012 MPC
meeting. Officials turned clearly more dovish lately, entertaining the possibility of cutting the policy rate by 25bp in the
last five MPC meetings. We expect two data-dependent cuts of 25bp to the policy rate, starting most likely in 4Q2013.
Fiscal Policy Outlook: Fiscal execution remains disciplined and strongly counter-cyclical. The 2014 budget bill recently
submitted to Congress projects a 3.9% real expansion in public spending next year, the lowest print in four years. This
would be consistent with the convergence of the structural fiscal deficit to the 1.0% of GDP target set by the Pinera
administration. The public debt burden is the lowest among the main economies in Latin America.
Balance of Payments Situation: The current account deficit is projected to widen to the 4.0%-4.5% of GDP range in 2013
from 3.5% in 2012, driven by growing imports and weakening exports. Deficits have been comfortably financed by capital
inflows, particularly FDI inflows.
Things to Watch: The strength of the domestic business cycle and the evolution of inflation and the current account.
Changes to the outlook for copper prices and for growth in China. Political developments ahead of the presidential and
legislative elections in November.
Tiago Severo
Chile: BBoP vs. Current Account
$/CLP
800
8%
700
6%
600
% GDP
4-qtr ma
CA
BBoP
4%
500
2%
400
0%
300
-2%
200
Spot
100
0
GSDEER
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
-4%
-6%
04
06
08
10
12
14
29
October 10, 2013
Colombian Peso
FX Forecasts: We maintain our 3-, 6- and 12-month forecasts for $/COP at 1,950, 2,000 and 2,050 respectively. This
implies /COP at 2,691, 2,800 and 2,870 in 3, 6 and 12 months. The current $/COP GSDEER is 2,063 and /COP GSDEER is
2,452.
Motivation for Our FX View: We expect the COP to continue to depreciate gradually over the coming months,
reflecting the impact of higher core global yields, sluggish external demand, lower commodity prices and the authorities
commitment to support the tradable sectors of the economy. The Central Bank renewed its Dollar-buying program in
September, but it reduced the size of the intervention envelope significantly, from a minimum of US$2.5bn in the
previous three months to a maximum of US$1.0bn over the last quarter of 2013. Officials at the Central Bank and the
ministry of finance are clearly more comfortable with the recent levels of the COP after the currency lost ground during
the May-August period.
Monetary Policy and FX Framework: The Central Bank targets inflation (3.0%1.0%) under a managed-float FX
regime but has in the past intervened in the spot FX market, including through different forms of capital controls, to
prevent excessive COP volatility.
Growth/Inflation Outlook: The real business cycle is showing signs of recovery at the margin. Real GDP expanded
4.2%yoy in 2Q2013, up from a mild 2.7%yoy in the first quarter, buoyed by the acceleration in private and public
consumption and the improvement in net exports. Solid retail sales and industrial production figures in July suggest the
economy may continue to regain momentum in the second half of the year, supported by monetary and fiscal stimuli, a
weaker currency and the gradual recovery in external demand. Inflation remains subdued and has failed to climb from
the lower end of the IT range over the last few months. We expect inflation to converge to 3.0% by year-end, driven by
base effects and moderate exchange rate pass-through.
Monetary Policy Forecast: The MPC unanimously maintained the policy rate unchanged at 3.25% for the sixth
consecutive month in September, sending a strong signal that further monetary easing is unlikely in the short term. The
strong 2Q2013 GDP report and the solid indicators of activity in July assuaged the most dovish members on the MPC and
reinforced the view of more hawkish directors who believe monetary conditions are already stimulative.
Fiscal Policy Outlook: There is a strong commitment to fiscal discipline. The central government has used the betterthan-expected revenue performance to over-comply with the fiscal deficit targets during the recent years.
Balance of Payments Situation: The current account deficit is expected to widen to 3.6% of GDP in 2013 from 3.3% in
2012. The trade surplus is projected to decline to 0.8% of GDP in 2013 from 1.3% previously.
Things to Watch: The strength of the domestic business cycle. Political developments ahead of the 2014 presidential
and legislative elections. Peace talks between the government and the FARC.
Tiago Severo
Colombia: BBoP vs. Current Account
$/COP
6%
3000
Spot
2500
GSDEER
4%
2000
2%
1500
0%
1000
-2%
500
-4%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-6%
% GDP
4-qtr ma
97
99
CA
BBoP
01
03
05
07
09
11
13
30
October 10, 2013
Mexican Peso
FX Forecasts: We maintain our 3-, 6- and 12-month $/MXN forecasts at 12.90, 12.80 and 12.60, respectively. This implies
/MXN at 17.8, 17.9 and 17.6 in 3, 6 and 12 months. The current $/MXN GSDEER is 13.4 and /MXN GSDEER is 15.9.
Motivation for Our FX View: The MXN has weakened significantly since hitting 11.98 to the USD in early May, driven
chiefly by external factors: the re-pricing of core rates and risk appetite towards EM assets triggered by the reassessment of
the near-term monetary stance in the US. We expect part of the recent weakness to mean-revert in the near term, assuming
that global financial conditions stabilise and some of the near-term uncertainty dissipates. The MXN continues to find
support in strong macro fundamentals, a disciplined policy mix and the constructive outlook for structural reforms,
particularly in the energy sector.
Monetary Policy and FX Framework: The Central Bank targets inflation (3.0%1.0%) by calibrating the TdF policy rate
level under a managed-float FX regime. Banxico may intervene in the FX market to dampen volatility and/or avoid
dislocations under thin market liquidity conditions.
Growth/Inflation Outlook: The output gap widened significantly in 1H2013 and is expected to remain in negative
territory until 2015. Real GDP contracted 0.74%qoq sa (non-annualised) in 2Q2013 following stagnation at the margin in
1Q, driven by the retrenchment of industry and services. We expect real GDP to grow by just 1.1% in 2013. Headline
inflation is tracking at a comfortable 3.46% (2H September), with core running at a significantly below-target 2.54%.
Monetary Policy Forecast: The MPC cut the policy rate by 25bp to 3.75% at the September meeting on expectations of
significant slack in the economy for a prolonged period of time, optimism with regard to progress on the structural
reform front and the benefits that reform may deliver on the inflation front, and overall increased comfort with the
inflation outlook. Furthermore, the MPC downplayed the risks to inflation from: (1) a weaker MXN (it expects the passthrough to be limited) and (2) the changes in relative prices triggered by the forthcoming tax reform (it expects the
impact to be transient and not to generate second-round effects). In our assessment, the domestic growth-inflation
outlook and balance of risks supports another 25bp policy rate cut at the October 25 meeting (after all, an isolated 25bp
cut would offer only tangential support to demand).
Fiscal Policy Outlook: The fiscal/public-debt picture remains strong. The central government is likely to post a 2.4% of
GDP deficit in 2013, and a wider 3.5% of GDP deficit in 2014.
Balance of Payments Situation: The balance of payments has been a clear source of macro strength and a
fundamental MXN anchor. The current account posted a moderate 1.3% of GDP deficit in 2012. We expect the current
account deficit to widen slightly at the margin but remain well below 2.0% of GDP in 2013.
Things to Watch: The real business cycle momentum and progress on the structural reform agenda.
Alberto M. Ramos
Mexico: BBoP vs. Current Account
$/MXN
6%
16
14
Spot
GSDEER
12
4%
% GDP
4-qtr ma
2%
10
0%
-2%
-4%
4
2
-6%
-8%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
CA
BBoP
91
93
95
97
99
01
03
05
07
09
11
13
31
October 10, 2013
Peruvian New Sol

FX Forecasts: We maintain our 3-, 6- and 12-month forecasts for $/PEN at 2.80, 2.85 and 2.85 respectively. This implies
/PEN at 3.86, 3.99 and 3.99 in 3, 6 and 12 months. The current $/PEN GSDEER is 3.32 and /PEN GSDEER is 3.95.
Motivation for Our FX View: Our forecasts reflect the projected deterioration of the currencys medium-term
fundamentals, associated with expected further declines in commodity prices and a widening current account deficit.
Easier domestic monetary conditions should also weaken the Sol. The Central Bank reduced reserve requirements on
Sol-denominated deposits for the third consecutive month in October, in an attempt to stimulate domestic credit/liquidity
to arrest the slowdown in the domestic business cycle. The strategy increases the relative cost of Dollar-based financial
transactions, contributing to the de-dollarisation of the economy. We expect officials to continue to rely on reserve
management and macroprudential measures as the preferred tool to calibrate policy in the near term.
Monetary Policy and FX Framework: The Central Bank conducts monetary policy within an inflation targeting
regime: the target is a challenging 2%1%. The Bank holds monthly monetary policy meetings and pursues a heavily
managed/floating FX regime.
Growth/Inflation Outlook: After several quarters of strong and above-trend growth, real GDP growth declined to
5.0%yoy in 1H2013, sparking concerns about the possibility of a more pronounced deceleration of the real business cycle.
The marked loss of forward momentum has been driven by a slowdown in private investment and sluggish external
demand, which more than offset the increase in public spending. We expect growth to firm somewhat in 2H2013 and the
economy to expand 5.3% in 2013 as whole, but the low statistical carry-over associated with the weaker-than-expected
prints early in the year adds downside risk to our baseline forecast. Headline inflation decelerated markedly to 2.8%yoy in
September, returning to the target range after two months. Core measures continue to hover outside the IT range but
remain low on an absolute basis (3.0%-3.5%yoy). We expect inflation to stay slightly above 2.0% over the next two years.
Monetary Policy Forecast: The MPC has been on hold at 4.25% since May 2011 and has in recent months maintained a
broadly neutral bias. We expect the policy rate to remain unchanged for an extended period of time. The authorities will
likely continue to rely on macroprudential measures as a lever to calibrate policy during the next several months.
Fiscal Policy Outlook: Fiscal execution was disciplined during 2012, with the non-financial public sector (NFPS) posting
a primary surplus of 3.2% of GDP. We expect the NFPS primary surplus to decline markedly to 1.7% of GDP in 2013.
Balance of Payments Situation: We expect the current account deficit to widen to 5.0% of GDP in 2013 from 3.6% in
2012, as import growth remains strong while lower commodity prices and sluggish external demand keep exports in
check. Resilient capital inflows, in particular FDI inflows, should continue to finance deficits comfortably.
Things to Watch: The strength of the business cycle, the evolution of commodity prices, the potential introduction of
additional macroprudential measures and the resolution of ongoing mining disputes.
Tiago Severo
$/PEN
Peru: Current Account
4.5
4%
4.0
2%
3.5
0%
3.0
-2%
2.5
-4%
2.0
-6%
1.5
Spot
1.0
GSDEER
0.5
% GDP
4-qtr ma
91 93 95 97 99 01 03 05 07 09 11 13 15
-8%
-10%
CA
91 93 95 97 99 01 03 05 07 09 11 13 15
32
October 10, 2013
Venezuelan Bolivar
FX Forecasts: We maintain our 3-, 6- and 12-month $/VEF forecasts at 6.30, 8.80 and 8.80, noting that the risk of
devaluation greatly increases after the municipal elections in early December and that there could be additional
devaluations on the 6- to 12-month horizon. This implies /VEF at 8.69, 12.32 and 12.32 in 3, 6 and 12 months. The current
$/VEF GSDEER is 6.60 and the /VEF GSDEER is 7.84. The newly implemented SICAD mechanism has proven insufficient
to satisfy USD demand.
Motivation for Our FX View: Devaluation is likely given large budget deficits, declining reserves and record inflation. In
the non-official market the $/VEF is trading at a 600% premium over the official 6.3 parity, reflecting the magnitude of the
scarcity of hard currency. The central-bank-operated SITME Dollar-bond trading platform has been replaced by SICAD: a
centralised system that involves USD cash or bond auctions to complement the CADIVI system (which supplies foreign
exchange at the official VEF/USD 6.3 fixed rate). SICAD auctions have been infrequent and unpredictable, and the cut-off
prices have not been disclosed (local press have reported values in the 10-11 $/VEF range). President Maduro announced
that the government is studying the implementation of another FX rationing mechanism. In asking the National
Assembly for enabling powers to rule by decree, the President strongly criticised CADIVIs inefficiencies, signalling that
the system may also suffer some important modifications.
Monetary Policy and FX Framework: Monetary policy remains highly accommodative and subordinated to fiscal
needs. The autonomy of the Central Bank has been compromised in recent years. The Bank sets a floor/ceiling on bank
deposit/loan rates, and directs about half of the total credit in the economy.
Growth/Inflation Outlook: Inflation remains elevated and the risk of hyper-inflation is rising. INPC inflation accelerated
to 45.4% in August (from 20.1% in December), with core prices running at 47%, denoting particularly adverse short-term
dynamics. We expect real GDP growth to decelerate to 1.6% in 2013 (with risk to the downside), from 5.6% in 2012, as the
authorities are obliged to scale back the degree of fiscal stimulus to the economy, and as heightened political uncertainty
continues to impair investment spending.
Monetary Policy Forecast: Domestic financial conditions have been loose over the past few years (highly negative real
rates), which undermines the effectiveness of the fixed exchange rate regime as the economys nominal anchor.
Fiscal Policy Outlook: The fiscal deficit widened significantly ahead of the October 2012 presidential election. Fiscal
execution remains opaque, but partial figures show some restraint in real terms.
Balance of Payments Situation: The trade surplus shrank to 9.9% of GDP in 2012 from 14.6% of GDP in 2011 due to a
sharp rise in imports. The deteriorating trade balance reduced the current account surplus to just 2.9% of GDP in 2012
(from 7.7% of GDP in 2011). Sizeable private-sector capital flight is likely to persist, given the country's deteriorating
macro performance, legal/regulatory uncertainty and the weak enforcement of the sanctity of contracts.
Things to Watch: The inflation outlook, the level of Central Bank reserves and the overall political dynamics.
Mauro Roca
Venezuela: BBoP vs Current Account
$/VEF
25%
7.0
Spot
6.0
CA
BBoP
GSDEER
5.0
15%
4.0
10%
3.0
5%
2.0
0%
1.0
-5%
0.0
% of GDP
20%
95
97
99
01
03
05
07
09
11
13
15
-10%
94
96
98
00
02
04
06
08
10
12
14
33
October 10, 2013
Asia
Australian Dollar
FX Forecasts: We have retained our 3-, 6- and 12-month forecasts for A$/US$ at 0.90, 0.88 and 0.85. This implies /AUD
at 1.53, 1.59 and 1.65. The current A$/US$ GSDEER is 0.81 and /A$ GSDEER is 1.47.
Motivation for Our FX View: Our overall views on the outlook for the A$ are unchanged. That is, we continue to
forecast a weaker A$ given our expectation that unhedged capital inflows are becoming less A$-positive, which will in
turn allow the A$ to reconnect with its weaker fundamentals (i.e., relative growth, relative rates, relative commodity
prices). The risk to our view is a bout of strong capital flows from Japan.
Monetary Policy and FX Framework: Inflation targeting: The RBA aims to keep CPI inflation between 2% and 3% on
average over the cycle. This is implemented by aiming to keep underlying inflation within this target band, but it allows
flexibility for policy to take account of short-run developments in employment and output. The FX regime is free-float.
Growth/Inflation Outlook: The Australian economy is currently growing well below trend and this is likely to persist
into 2014 as the mining construction boom starts to unwind and the non-mining economy is slow to respond to easier
financial conditions. This outlook should see the unemployment rate trend up to a peak of 6.2% in 1H2014. We expect this
increase in spare capacity to contain inflation (even with the recent A$ depreciation), which we forecast to remain in the
bottom half of the RBAs target band through both 2013 and 2014.
Monetary Policy Forecast: With inflation contained, we believe momentum in the non-mining economy remains short
of that desired by policy-makers as key headwinds to growth from the peak in mining investment intensify. While the
RBA has recently hinted at a more neutral stance, and future policy moves will be heavily data-dependent, we expect a
final 25bp interest rate cut in November.
Fiscal Policy Outlook: The recent change in government is unlikely to alter dramatically the fiscal policy outlook, with
previous forecasts guiding to ongoing budget deficits out until 2015-16. However, a period of extended fiscal constraint
is likely, in part due to a likely undershoot in the Treasurys nominal GDP growth (and hence government revenue)
forecasts.
Balance of Payments Situation: At 3.1% of GDP, the annual current account deficit has narrowed as the trade balance
shifted back to surplus on weaker imports and a modest lift in commodity prices. After showing a deteriorating trend, the
BBoP bounced sharply in 2Q2013 (+1.9% of GDP) as FDI inflows increased.
Things to Watch: Whether BoJ policy sees a genuine/sustained rise in demand for A$ assets, and the degree to which
this offsets A$-negative pressures from less supportive rates, growth, commodity prices and capital inflows.
Tim Toohey
Australia: BBoP vs. Current Account
A$/$
6%
1.6
Spot
1.4
GSDEER
CA
BBoP
% GDP
4-qtr ma
4%
2%
1.2
0%
1.0
-2%
0.8
-4%
0.6
0.4
-6%
74 77 80 83 86 89 92 95 98 01 04 07 10 13 16
-8%
91
93
95
97
99
01
03
05
07
09
11
13
34
October 10, 2013
Chinese Yuan
FX Forecasts: We have revised our USD/CNY forecast to 6.16, 6.15 and 6.15, from the previous path of 6.16 flat, on 3-, 6and 12-month horizons. The implied EUR/CNY forecasts are 8.5, 8.6 and 8.6. GSDEER for USD/CNY: 7.20.
Motivation for Our FX View: The CNY has appreciated by around 6% in effective terms since the turn of the year. While
export momentum has gradually improved, we expect a largely stable CNY vs. the Dollar in the coming months, in view of
continued Dollar strength and signs of inflow slowdown.
Monetary Policy and FX Framework: The People's Bank of China (PBoC) is not independent of the central government,
and has multiple targets of maintaining price stability and high growth. The Monetary Policy Committee of the PBoC holds
meetings on a quarterly basis. However, it is an advisory body that does not determine policy direction. Instead, actual
policy decisions are made by the PBoC governors, and are subject to supervision/approval by the State Council. The FX
regime has been a managed float in July 2005 - August 2008 and again in June 2010.
Growth/Inflation Outlook: Recent official and HSBC PMIs pointed to a moderation in September sequential
manufacturing growth, after the better activity data in August. That said, Q3 sequential growth remains healthy and we
expect Q3 GDP growth to be 7.8%yoy (or 9.3%qoq ann), up from 7.5%yoy(6.6%qoq ann) in Q2. On the inflation front, we
expect CPI growth to be 2.5% in 2013.
Monetary Policy Forecast: Liquidity conditions in August were looser. M2 growth was above market expectations and
total social financing (tsf) rebounded significantly as well. The interbank rate also stabilised and returned from the extreme
values seen in late June. We expect monetary policy to be largely steady in the coming month.
Fiscal Policy Outlook: The announced 2013 budget confirmed that the expansionary fiscal stance will remain in place,
with expenditure shifting towards social spending. We expect both budget revenue and expenditure as a share of GDP to
rise further this year, with the deficit to GDP ratio reaching around 2% of GDP.
Balance of Payments Situation: FX inflows returned in August, reflecting better China sentiment and the temporary
easing in global yields. On the current account side, the Chinese economy has become more balanced in recent years. In
2012, the current account surplus was 2.3% of GDP, down from the 5%-10% range in the past few years, and we continue to
expect the current account surplus to stay at a low level.
Things to Watch: The sustainability of the external demand recovery.
Li Cui, Yu Song, MK Tang and Maggie Wei
China: BBoP vs Current Account
$/CNY
18%
9.4
16%
8.4
CA
% of GDP
BBoP
14%
BBoP = Current Account + Net FDI
+ Net Portfolio Investment
12%
7.4
10%
6.4
8%
6%
5.4
4%
4.4
Spot
GSDEER
3.4
89 91 93 95 97 99 01 03 05 07 09 11 13 15

Our forecast for $/CNY is a projection for the PBoC fix.
2%
0%
97
99
01
03
05
07
09
11
13
35
October 10, 2013
Hong Kong Dollar

FX Forecasts: We are maintaining our 3-, 6- and 12-month forecasts for $/HKD at 7.80, 7.80 and 7.80. This implies /HKD
at 10.8, 10.9 and 10.9 in 3, 6 and 12 months, respectively. The current $/HKD GSDEER is 6.5 and /HKD GSDEER is 7.7.
Motivation for Our FX View: In our view, the political incentive to abandon (or modify) the HKD peg system is still
low, despite the HKD persistently trading on the strong side of the convertibility zone; continued global uncertainties
further diminish the likelihood of the authorities making changes to the current HKD peg system.
Monetary Policy and FX Framework: The HKMA pursues just one goal: maintaining the USD/HKD peg. The HKD
exchange rate follows a currency board regime, with a fixed USD/HKD 'Convertibility Zone' of 7.75-7.85.
Growth/Inflation Outlook: GDP growth for 2012 was 1.5%. 2Q2013 GDP was 3.3%yoy and 3.3%qoq annualised after
seasonal adjustment. We expect 2013 GDP growth to be 3.2% for 2013 and 3.4% for 2014. On the inflation front, headline
CPI inflation was at 4.1% for 2012, falling to 4.0% in 2Q2013, and we expect inflation to be 3.6% for the full year of 2013.
We expect moderate growth and softer residential rental increases to guide inflation further down to 3.3% in 2014.
Monetary Policy Forecast: We think the HKD-USD peg is likely to remain in place for the foreseeable future, given the
lack of a better alternative monetary policy regime at this stage. In our opinion, the costs of transitioning to a new regime
would outweigh the benefits. In the meantime, we think Hong Kong will have little choice but to continue to import loose
financial conditions from the US, with its interest rates still linked to the USD interest rate cycle.
Fiscal Policy Outlook: For FY2012/2013, the governments consolidated budget surplus is US$8.3bn, or 3.2% of GDP.
For FY2013/2014, the budget envisages a small consolidated deficit of US$0.6bn, or 0.2% of GDP. In our view, however,
fiscal outperformance relative to the budget will likely continue. Therefore, we expect the overall fiscal stance to be
broadly neutral in the current fiscal year. A majority of the targeted support for households to cope with still-high
inflation has been renewed.
Balance of Payments Situation: The current account surplus was 1.3% of GDP in 2012, and we expect it to reach 1.5%
of GDP in 2013. Given the fixed exchange rate system in Hong Kong, the BBoP has not been a determining factor for its
monetary policy, or for the HKD exchange rate specifically. As Hong Kong is an entrepot trade centre for the mainland
and an offshore hub for investment in China, the relevance of the BBoP position for the currency relates primarily to
portfolio capital flowsand, even then, the substantial presence of HKD-denominated shares of non-resident firms
traded on the Hong Kong Stock Exchange complicates the link between portfolio capital flows and the currency
movement.
Things to Watch: We will continue to monitor further developments in soft and hard infrastructure projects aimed at
enhancing integration with the mainland economy, including the ongoing expansion of offshore Renminbi businesses.
MK Tang and Maggie Wei
$/HKD
10.30
9.30
Hong Kong: BBoP vs Current Account

Spot
GSDEER
30%
% GDP
4-qtr ma
CA
BBoP
20%
10%
8.30
0%
7.30
-10%
-20%
6.30
-30%
5.30
4.30
40%
-40%
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-50%
00 01 02 03 04 05 06 07 08 09 10 11 12 13
36
October 10, 2013
Indian Rupee
FX Forecasts: Our USD/INR forecasts are 70, 72 and 70 in 3, 6 and 12 months, respectively. Our EUR/INR forecasts are
96.6, 100.8 and 98.0. The current GSDEER for USD/INR is 71.6.
Motivation for our FX View: The risks to our near-term FX forecast are mainly due to better-than-expected trade data.
However, we expect some real depreciation pressure over six months as the external funding environment becomes
more challenging and the slowdown in GDP growth affects capital flows, along with high inflation and a deterioration in
fiscal and election uncertainty. Over 12 months, we expect some stabilisation, with the removal of election uncertainty in
March-April likely to help sentiment, and an adjustment in the current account in progress.
Monetary Policy and FX Framework: Within the operating procedure for monetary policy, the RBI targets the interest
rate corridor, with the repo rate in the middle, the reverse repo rate 100bp below as a floor, and the Marginal Standing
Facility (MSF) rate, which is currently at 150bp, above as a ceiling. The exchange rate is also managed to avoid excess
volatility.
Growth/Inflation Outlook: 2Q CY2013 growth fell to 4.4%yoy from 4.8%yoy in the previous quarter on weak industrial
growth. We forecast FY2014 GDP growth at 4.0%yoy owing to a lack of investment activity and slowing consumer
demand. On inflation, we expect near-term weakness in core inflation but an increase thereafter. Our FY2014 inflation
forecast is 7.0%yoy owing to our forecast currency depreciation.
Monetary Policy Forecast: In its September meeting, the Reserve Bank of India (RBI) raised the repo rate by 25bp,
above expectations. The RBI also cut the Marginal Standing Facility (MSF) rate twice, by a total of 125bp. We expect the
RBI to increase the repo rate by 100bp to 8.5% by end-March in order to fight inflation and inflation expectations.
Fiscal Policy Outlook: We forecast the FY2014 central government fiscal deficit at 5.2% of GDP, versus the budget
estimate of 4.8% of GDP, mainly due to a slowdown in tax revenue growth and rising under-recoveries. In April-August
2013, gross tax revenue growth was just 8.7%yoy, versus 18% for the same period in 2012.
Balance of Payments Situation: 2Q BoP data were better than expected as, despite the increase in the current
account, there was only a small loss in reserves, while external debt declined during the quarter due to valuation gains.
The trade deficit improved significantly to US$6.8bn in September (August US$10.9bn), mainly due to a significant fall in
imports. We expect the current account deficit to improve significantly to 3.5% of GDP in FY2014 from 4.8% of GDP in
FY2013 on recent government measures to curb gold and other non-essential imports and a sharper slowdown in
domestic demand.
Things to Watch: September WPI, October Monetary policy meeting.
Tushar Poddar and Vishal Vaibhaw
India: BBoP vs Current Account
$/INR
77
67
6%
Spot
GSDEER
57
4%
% GDP
4-qtr ma
2%
47
0%
37
-2%
27
17
-4%
-6%
CA
BBoP
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
01 02 03 04 05 06 07 08 09 10 11 12 13
37
October 10, 2013
Indonesian Rupiah
FX Forecasts: Our 3-, 6- and 12-month forecasts for $/IDR are at 12,000, 12,000 and 11,800. This implies that our
forecasts for /IDR are 16,560, 16,800 and 16,520 in 3, 6 and 12 months. The current $/IDR GSDEER is 11,582.
Motivation for Our FX View: While the Feds decision not to taper in September lessened some of the portfolio outflow
pressures for the IDR, we continue to expect IDR weakness in the near term as its large current account funding gap
currently still leaves the IDR vulnerable to swings in capital flows.
Monetary Policy and FX Framework: Bank Indonesia operates in an Inflation Targeting Framework, which aims to
improve effectiveness and governance in monetary policy, in order to achieve the ultimate goal of price stability in
support of sustainable economic growth and public prosperity. The IDR operates as a managed float with the aim of
preventing excessive exchange rate volatility.
Growth/Inflation Outlook: We recently reduced our 2013 and 2014 GDP forecasts to 5.4%yoy and 5.5%yoy, from 6.0%
and 6.2%yoy previously, on the back of a tightening in financial conditions (in particular from the recent rates hike) and
the slower-than-expected export recovery. We continue to expect elevated inflation prints over the next few months due
to the fuel hike instituted in June, with our 2013 CPI inflation forecast at 8.2%yoy.
Monetary Policy Forecast: We continue to expect another 50bp of rate hikes for this year. We think the BI should
continue with its rate hike cycle to spur a faster current account recovery, so as to minimise downside risks in this
environment of uncertain capital flows. The decision to keep rates on hold during the October 4 policy meeting was likely
due to recent improvements in inflation and trade data, as well as reduced capital outflow pressures in recent weeks after
the Feds decision not to taper.
Fiscal Policy Outlook: The government has unveiled a revised FY2013 budget, widening the budget deficit to 2.5%,
compared with the previous draft 2013 budget deficit of 1.7%.The revised 2013 budget contains the new assumptions for
fuel price hikes, and the realised budget deficit would thus have been wider if they had not been approved
Balance of Payments Situation: The current account recovery has been more protracted than expected. We expect
the current account to come in at -3.7% GDP for 2013 and -2.9% GDP for 2014.
Things to Watch: The Central Bank's measures for boosting onshore USD liquidity. The trade balance and progress on
the current account recovery. The forward trajectory on inflation in the near term given the impact of the fuel price hike
and especially given the continued weakness in the IDR.
Mark Tan and Hui Ying Chan
Indonesia: BBoP vs Current Account
$/IDR
8%
14000
Spot
12000
GSDEER
6%
10000
4%
8000
2%
6000
0%
4000
-2%
2000
-4%
-6%
% GDP
4-qtr ma
CA
BBoP
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
38
October 10, 2013
Korean Won
FX Forecasts: We recently revised our 3-month USD/KRW forecast to 1,080 from 1,110 previously, while maintaining
our forecasts at 1,100 over the 6- and 12-month horizons. On an annual average basis, we expect the USD/KRW rate for
2013 to be 1,100. This implies EUR/KRW at 1,490, 1,540 and 1,540 in 3, 6 and 12 months. The current USD/KRW GSDEER
is 1,364 and EUR/KRW GSDEER is 1,621.
Motivation for Our FX View: The current account could reach a high of 5.1% of GDP this year on the back of a
recovery in exports and a pick-up in shipbuilding-related advance payments. However, we expect the current account to
fall to 3.6% of GDP in 2014 as imports pick up due to a domestic demand recovery in both investment and consumption.
Monetary Policy and FX Framework: Korea has a formal inflation-targeting regime that aims for annual headline
inflation of 2.5%-3.5% over 2013-2015. The exchange rate policy is undertaken by the government. The exchange rate
regime has changed from a free-floating to a floating regime, according to the IMF, given smoothing interventions after
the Global Financial Crisis.
Growth/Inflation Outlook: We recently revised up our real GDP growth forecast to 2.9%yoy for 2013 from 2.7%
previously, and to 3.7%yoy for 2014 from 3.5%yoy. The upward revisions reflect an improving export outlook and signs of a
pick-up in investment. We also see room for a modest recovery in consumption given improving job markets and
normalising housing markets. We expect inflation to remain benign, well below the target range of 2.5%-3.5%.
Monetary Policy Forecast: We continue to expect the Monetary Policy Committee to keep the policy rate on hold at
2.5% until mid-2014 before hiking in 2H2014. Our policy rate forecast is 3.00% for end-2014 and 3.5% for end-2015.
Fiscal Policy Outlook: Fiscal policy for the remainder of this year will be less expansionary than before due to the heavy
front-loading of spending in the first half and possible shortfalls in revenue collections. That said, we do not expect a large
fiscal drag in Q4, given that most revenue shortfalls, if there are any, could be offset by drawdowns of balances in budgetary
funds, without cutting budgetary spending proportionally. The budget bill for 2014 envisages the maintenance of the same
fiscal stance as this year.
Balance of Payments Situation: The current account surplus could reach 5.1% of GDP in 2013 given stronger than
expected exports, shipbuilding-related advance payments and lower oil prices. However, we expect the CA to fall to 3.6%
in 2014 as imports pick up on the back of a domestic demand recovery.
Things to Watch: Monthly export data, including 20-day data, will be important for gauging the momentum of the
countrys biggest growth driver. It will also serve as a timely indicator of regional export momentum and the global cycle.
The JPY/KRW should be watched closely, as an indicator of the competitiveness of Korean exporters. Oil prices are also
important.
Goohoon Kwon and Chiwoong Lee
Korea: BBoP vs Current Account
$/KRW
14%
1800
1600
Spot
12%
GSDEER
10%
% GDP
4-qtr ma
CA
BBoP
8%
1400
6%
1200
4%
2%
1000
0%
-2%
800
600
-4%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-6%
91 93 95 97 99 01 03 05 07 09 11 13
39
October 10, 2013
Malaysian Ringgit
FX Forecasts: Our 3-, 6- and 12-month forecasts for $/MYR are at 3.40, 3.30 and 3.20. This implies EUR/MYR at 4.69, 4.62
and 4.48 in 3, 6 and 12 months, respectively. The current $/MYR GSDEER is 2.67.
Motivation for Our FX View: The MYR had previously come under some pressure, partly as a result of worries about
its deteriorating current account balance. We still expect some near-term weakness until we see further confirmation of
an improvement in the current account balance in the Q3 BoP data. The recent improvements in the trade balance will
also help to ease concerns about further current account deterioration.
Monetary Policy and FX Framework: Monetary policy is set by the Board of Directors of Bank Negara Malaysia
(BNM). The policy instrument is the Overnight Policy Rate, which is 3.0% currently. The Ringgit has operated in a
managed float framework since its USD peg was lifted in July 2005.
Growth/Inflation Outlook: We recently reduced our GDP forecasts for 2013 and 2014 to 4.6%yoy and 4.8%yoy from
5.1%yoy and 5.2%yoy respectively, on the back of a tightening in financial conditions and a slower than expected export
recovery. On the back of the lower growth outlook, we have also reduced our inflation forecasts for 2013 and 2014 to
2.3%yoy and 2.4%yoy, from 2.6%yoy and 2.5%yoy, on the back of a more protracted closing of the output gap, and partly
on the more muted inflation trends seen so far this year (aided by benign commodity prices seen in the earlier part of the
year).
Monetary Policy Forecast: Bank Negara Malaysia kept the Overnight Policy Rate unchanged at its latest meeting, in
line with our and consensus expectations. We have recently pushed back the timing of rate normalisation to 2Q2014 from
1Q2014, on the slower than expected growth outlook and the more muted inflationary trajectories that we envisage
alongside the recent GDP and inflation forecast reductions.
Fiscal Policy Outlook: The government is targeting a fiscal deficit of 4.0% of GDP in 2013 after 4.5% in 2012. Our fiscal
deficit forecast for 2013 is 4.2% of GDP and for 2014 it is 3.6%, after an estimated deficit of 4.5% of GDP for 2012. More
needs to be delivered on fiscal consolidation if the government is to achieve its target of lowering the deficit to the 3%
level by 2015.
Balance of Payments Situation: We are forecasting a gradual recovery in the current account trajectory, to 2.0% for
2013 and 3.0% for 2014, from 6.1% in 2012, on the back of a recovery in the external outlook.
Things to Watch: Continued progress on fiscal reform, including on the potential introduction of a GST tax. The trade
balance and current account trajectory.
Malaysia: BBoP vs Current Account
$/MYR
4.5
Spot
4.0
GSDEER
30%
25%
CA
% GDP
4-qtr ma
BBoP
20%
3.5
15%
10%
3.0
5%
2.5
2.0
0%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-5%
06
07
08
09
10
11
12
13
40
October 10, 2013
New Zealand Dollar

FX Forecasts: We have retained our 3-, 6- and 12-month forecasts for NZD/$ at 0.77, 0.77 and 0.76. This implies /NZD
at 1.79, 1.82 and 1.84 in 3, 6 and 12 months, respectively. The current NZD/$ GSDEER is 0.65 and /NZD GSDEER is 1.83.
Motivation for Our FX View: Following the US Federal Reserves decision to delay tapering, the NZD has performed
solidly. NZ-central factors have also been supportive, with growth momentum improving, relative yield advantage set to
widen, commodity prices still elevated and the fiscal outlook credible. That said, our forecasts continue to show a gradual
depreciation in the NZD against the USD over a 12-month horizon in part due to the changing funding environment for
economies with large current account deficits. We continue to forecast ongoing outperformance against the AUD, driven
by the relative growth, monetary policy and terms of trade outlooks.
Monetary Policy and FX Framework: The RBNZ is a flexible inflation targeter. The RBNZ Governor is sole decision
maker on the Official Cash Rate (OCR), and contracted to achieve "future CPI inflation outcomes between 1 per cent and 3
per cent on average over the medium term, with a focus on keeping future average inflation near the 2 per cent target
midpoint". The FX regime is a free float.
Growth/Inflation Outlook: A drought weighed on 1H2013 activity growth. However, economic activity over 2H2013
will be supported by the earthquake rebuild, rising house prices and a recovery in national income growth through terms
of trade gains. Annualised GDP growth of 3.0% is forecast over 2H2013, and we see risks skewed to the upside. This is
despite headwinds from fiscal drag, a weak Australian economy and an elevated NZD. Inflation pressures are currently
benign, although headline inflation is likely to rise modestly from 2H2013 as spare capacity is absorbed and as local food
price inflation increases.
Monetary Policy Forecast: Soft headline inflation and the high NZD leave the RBNZ reluctant to withdraw stimulus,
despite rising house prices and credit growth. To target these pressures more directly the RBNZ has introduced a speed
limit on high loan-to-value residential mortgage lending. We expect interest rates to be lifted in 1Q2014, although we
forecast only 50bp of hikes over 2014 as a whole.
Fiscal Policy Outlook: After a sharp deterioration in the fiscal position, in part owing to earthquake costs, the
government has begun a reasonably aggressive period of fiscal consolidation. The government remains committed to
returning to surpluses by FY2015 and has signalled this largely through expenditure restraint.
Balance of Payments Situation: The annual current account balance narrowed to -4.3% of GDP in 2Q2013 on the back
of terms of trade improvements. However, it is forecast to reach over -6% of GDP over a two-year horizon courtesy of
strong domestic demand growth. Given a sharp fall in portfolio inflows, the BBoP has widened to -5.4% of GDP.
Things to Watch: The ease with which NZ can fund its current account deficit remains important to watch.
Domestically, the focus is the timing and magnitude of the RBNZs approaching tightening cycle.
Philip Borkin
NZD/$
New Zealand: BBoP vs Current Account

6%
1.55
1.35
Spot
4%
GSDEER
2%
0%
1.15
-2%
0.95
-4%
-6%
0.75
-8%
-10%
0.55
-12%
0.35
% GDP
4-qtr ma
74 77 80 83 86 89 92 95 98 01 04 07 10 13 16
-14%
CA
BBoP
01 02 03 04 05 06 07 08 09 10 11 12 13
41
October 10, 2013
Philippine Peso
FX Forecasts: Our 3-, 6- and 12-month forecasts for $/PHP are at 43.5, 42.3 and 40.0. This implies /PHP at 60.00, 59.20
and 56.00 in 3, 6 and 12 months. The current $/PHP GSDEER is 56.1.
Motivation for Our FX View: The moderate appreciation trajectory over the forecast horizon remains intact,
underpinned by strong domestic growth and a still-supportive broad balance of payments. A number of factors remain
supportive of Peso strength over the next 12 months, but in particular stable remittances and strong domestic demand.
Monetary Policy and FX Framework: The Bangko Sentral ng Pilipinas (BSP) has an inflation targeting framework
(3%-5% in 2012) and aims to promote price stability to facilitate balanced and sustainable growth. The BSP uses the
overnight reverse repo rate (lending rate) and repo rate (borrowing rate) as its key policy instruments. The PHP operates
in a freely-floating exchange rate environment, where the BSP intervenes to manage excess volatility through openmarket operations.
Growth/Inflation Outlook: We recently upgraded our growth forecasts for Philippines for this year to 6.8%yoy from
5.5%yoy on the back of the upside surprise to growth registered over the 1H2013. That said, momentum is likely to slow
over H2 after a blistering H1 and as the headwinds of tighter financial conditions kick in.
Monetary Policy Forecast: We have recently pushed back the timing of rate normalisation to 2Q2014 from 1Q2014, on
the moderating momentum in the growth outlook and the more muted inflationary trajectories path we now envisage for
the Philippines.
Fiscal Policy Outlook: For FY2013, the government is proposing a further reduction in deficit targets to 2% of GDP. We
forecast that the fiscal deficit will come in at 2.0% in 2013 and 1.8% in 2014.
Balance of Payments Situation: We expect the current account to improve on a forward trajectory. Our forecasts are
for 3.7% of GDP in 2013 and 4.3% in 2014, after 2.8% of GDP in 2012. We believe that the growth outperformance and
strong remittances will continue to attract strong inflows, helping to support the external balance.
Things to Watch: The implementation of the Philippine Development Plan.
Philippines: BBoP vs Current Account
$/PHP
65
Spot
55
GSDEER
45
10%
% GDP
4-qtr ma
CA
BBoP
8%
6%
4%
35
2%
0%
25
-2%
15
5
12%
-4%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-6%
00 01 02 03 04 05 06 07 08 09 10 11 12 13
42
October 10, 2013
Singapore Dollar
FX Forecasts: Our 3-, 6- and 12-month forecasts for $/SGD are at 1.27, 1.25 and 1.23. This implies /SGD at 1.75, 1.75
and 1.72 in 3, 6 and 12 months. The current $/SGD GSDEER is 1.19.
Motivation for Our FX View: The moderate appreciation trajectory over the forecast horizon remains intact,
underpinned by a still-supportive broad balance of payments (healthy current account surpluses). We also expect the
MAS to keep the current SGD stance unchanged in October, maintaining the status quo for a slightly faster pace of
appreciation.
Monetary Policy and FX Framework: The MAS conducts monetary policy by targeting an undisclosed appreciation
path of the SGD NEER within a policy band, with the goal of maintaining stable inflation and growth.
Growth/Inflation Outlook: We recently reduced our GDP forecasts for 2013 and 2014 to 2.3%yoy and 3.2%yoy from
3.0%yoy and 3.3%yoy from 4.1%yoy and 3.6%yoy, partly on account of the more muted inflationary trends seen this year
(driven by a correction in car prices owing to a tightening in auto loans), and partly on the back of a more protracted
closing of the output gap.
Monetary Policy Forecast: We think the MAS will maintain the status quo of a slightly faster pace of appreciation. We
estimate that this translates into a +2.5% per annum slope of the SGD policy bands. We think that Aprils decision not to
change the slope, width and centre of the currency band continues to represent an effort to alleviate medium-term cost
pressures stemming from two main factors: loose financial conditions, driven by a low interest rate environment, and the
tight labour market, driven by ongoing labour market restructuring (including curbs on foreign labour supply growth).
Fiscal Policy Outlook: For FY2013, the government is projecting a slightly smaller surplus of S$2.4bn (0.7% of GDP),
compared with S$3.9bn (1.1% of GDP) in FY2012, mainly owing to increased expenditures, while revenues are projected
to remain largely unchanged.
Balance of Payments Situation: Our forecast for the current account is 17.2% of GDP in 2013 and 17.9% in 2014.
Things to Watch: The government's continued efforts to restructure the economy by boosting domestic productivity
and reducing reliance on foreign labour. This may have inflationary consequences over the medium term.
Singapore: BBoP vs Current Account
$/SGD
2.40
35%
Spot
2.20
GSDEER
2.00
25%
% GDP
4-qtr ma
15%
1.80
5%
1.60
-5%
1.40
-15%
1.20
1.00
CA
BBoP
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-25%
91 93 95 97 99 01 03 05 07 09 11 13
43
October 10, 2013
Taiwan Dollar
FX Forecasts: We maintain our forecasts for $/TWD at 30.3, 30.3 and 30.3 in 3, 6 and 12 months. This implies /TWD at
41.8, 42.4 and 42.4. The current $/TWD GSDEER is 25.2 and /TWD GSDEER is 30.0.
Motivation for Our FX View: Our forecasts for $/TWD reflect our view of persistent weakness in the Japanese Yen,
slowing economic growth and currently subdued inflationary pressure.
Monetary Policy and FX Framework: The CBC manages inflation and growth expectations simultaneously; it
adopts an intermediate monetary policy target for M2 growth (between 2%yoy and 6%yoy). The IMF defines the TWD
exchange rate regime as a managed float, and we believe the weightings for the KRW, JPY and CNY are the highest in
the trade-weighted basket of currencies that it monitors.
Growth/Inflation Outlook: The economy grew 2.49%yoy in Q2 after 1.62%yoy growth in Q1. Sequentially, the
economy expanded in Q2 by 2.34%qoq annualised, after seasonal adjustment. The government expects GDP growth
to be 2.3% in 2013 and inflation to fall to 1.07% this year, from 1.93% in 2012. We forecast growth of 2.8% in 2013, and
the inflation rate at 1.8%. If global growth does pick up, as we expect, net exports would be a major boost for activity
in Taiwan.
Monetary Policy Forecast: We expect the Central Bank to stay on hold through 2013, given that domestic activity
remains soft, the global economy is likely to pick up only slowly and the renewed Yen weakness poses headwinds to
exports. In our view, more clarity is needed on both the domestic and external outlook before further monetary policy
adjustments are made.
Fiscal Policy Outlook: In 2012, the budget balance recorded a small surplus, at 0.12% of GDP. We expect a deficit of
1.9% of GDP in 2013. The consolidated budget deficit reached US$8.9bn (1.9% of GDP) in 2011, lower than the
US$10.0bn (2.3% of GDP) deficit in 2010.
Balance of Payments Situation: On a four-quarter trend basis, the BBoP turned negative and breached multi-year
lows as a share of GDP in 1Q2013. The large current account surplus is more than fully offset by net FDI and in
particular net portfolio outflows.
Things to Watch: How the CBC manages the continued global uncertainties and maintains competitiveness in light
of JPY weakness.
MK Tang and Jonathan Sequeira
$/TWD
36
34
Taiwan: BBoP vs Current Account

Spot
GSDEER
12%
10%
% GDP
4-qtr ma
CA
BBoP
8%
32
6%
30
4%
28
2%
0%
26
24
-2%
89 91 93 95 97 99 01 03 05 07 09 11 13 15
-4%
89 91 93 95 97 99 01 03 05 07 09 11 13
44
October 10, 2013
Thai Baht
FX Forecasts: Our 3-, 6- and 12-month forecasts for $/THB are at 33.00, 32.50 and 32.00. This implies /THB at 45.5, 45.5
and 44.8 in 3, 6 and 12 months. The current $/THB GSDEER is 37.4.
Motivation for Our FX View: The THB had previously come under some pressure, partly as a result of Thailands
deteriorating current account balance. We still expect some near-term weakness until we see further confirmation of an
improvement in the current account balance in the Q3 BoP data. The recent improvements in the trade balance will also
help to ease worries about further current account deterioration.
Monetary Policy and FX Framework: The Bank of Thailand (BoT) sets the direction of monetary policy, with price
stability as the overriding objective, and also refines the inflation targeting framework (core CPI at 0.5% to 3.0%) to suit
the Thai economy. The Baht operates on a managed float regime, in which the BoT intervenes to prevent excess
volatility.
Growth/Inflation Outlook: We recently lowered our GDP forecasts for 2013 and 2014 to 4.0%yoy and 4.3%yoy from
2.5%yoy and 3.2%, from 3.8% in both years, on the back of a more protracted closing of the output gap, and also partly
on the more muted inflation trends seen so far this year (aided by the benign commodity prices seen in the earlier part of
the year).
Monetary Policy Forecast: The Bank of Thailand kept the policy rate unchanged at its latest meeting, in line with our
and consensus expectations. We recently pushed back the timing of rate normalisation to 2Q2014 from 4Q2013, on the
slower than expected growth outlook and the more muted inflationary trajectories that we envisage, alongside our recent
GDP and inflation forecast reductions.
Fiscal Policy Outlook: We expect the fiscal balance for Thailand to show a deficit of 3.2% in 2013 and 2014.
Balance of Payments Situation: We expect the current account to come in at -2.1% of GDP in 2013 and 0.8% in 2014.
Things to Watch: Continued political stability is critical to providing the stable backdrop needed for longer-term
infrastructure investment projects. Progress on the current account trajectory.
Thailand: BBoP vs Current Account
$/THB
20%
50
Spot
45
GSDEER
15%
% GDP
4-qtr ma
10%
40
5%
35
0%
30
-5%
25
20
CA
BBoP
-10%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-15%
93
95
97
99
01
03
05
07
09
11
13
45
October 10, 2013
Interest Rate Forecasts

Europe
3-Month Horizon
%
Euroland
UK
Sweden
Norway
Switzerland
Poland
6-Month Horizon
12-Month Horizon
Current*
Forward
Forecast
Forward
Forecast
Forward
3M
0.2
0.3
0.2
0.4
0.2
0.5
Forecast
0.2
10Y
1.9
1.9
2.0
2.0
2.2
2.1
2.4
3M
0.5
0.6
0.5
0.7
0.5
0.8
0.5
10Y
2.7
2.8
2.8
2.9
2.9
3.1
3.0
3M
1.2
1.2
1.2
1.3
1.2
1.5
1.4
10Y
2.5
2.5
2.5
2.6
2.7
2.7
2.9
3M
1.7
1.7
1.7
1.8
1.7
2.0
1.9
10Y
2.9
3.0
2.8
3.0
3.0
3.1
3.3
3M
0.1
0.0
0.0
0.0
0.0
0.1
0.0
10Y
1.0
1.1
1.0
1.1
1.2
1.2
1.4
3.3
3M
2.6
2.7
3.3
2.8
3.3
3.3
5Y
3.8
3.9
3.4
4.0
3.4
4.3
3.5
Czech Republic 3M
0.5
0.4
0.5
0.4
0.5
0.5
0.4
5Y
1.3
1.4
1.0
1.6
1.1
1.9
1.4
Hungary
3M
3.6
3.3
4.5
3.3
4.5
3.6
4.8
5Y
5.0
5.1
5.5
5.2
5.6
5.5
5.8
Russia
3M
6.8
7.2
6.3
6.5
Turkey
3M
7.1
7.2
7.5
7.8
South Africa
3M
5.1
5.2
5.0
5.5
5.1
6.1
5.2
5Y
6.9
7.0
6.2
7.2
6.2
7.8
6.5
Americas
3-Month Horizon
%
Current*
US
Canada
Forward
Forecast
6-Month Horizon
Forward
Forecast
12-Month Horizon
Forward
Forecast
3M
0.2
0.3
0.3
0.4
0.3
0.5
0.3
10Y
2.7
2.8
2.8
2.9
2.9
3.1
3.2
3M
1.2
1.3
1.4
1.3
1.4
1.4
1.6
10Y
2.6
2.7
3.0
2.7
3.0
2.8
3.3
Argentina
3M
18.3
19.0
22.0
24.3
Brazil
3M
9.5
9.8
9.8
9.8
Chile
3M
5.0
4.6
4.5
4.6
Mexico
3M
3.8
4.0
4.0
4.3
Current*
Forward
Forecast
Forward
Forecast
Forward
3M
0.1
0.2
0.3
0.1
0.3
0.2
0.3
10Y
0.7
0.7
1.0
0.7
1.1
0.8
1.2
Asia
3-Month Horizon
%
Japan
Australia
New Zealand
6-Month Horizon
12-Month Horizon
Forecast
3M
2.6
2.6
2.7
2.6
2.7
3.0
2.8
10Y
4.2
4.2
3.8
4.2
3.8
4.3
4.1
3M
2.8
2.7
2.7
3.0
3.1
3.7
3.2
10Y
4.8
4.3
4.3
4.5
Hong Kong
3M
0.4
0.5
0.4
0.5
0.4
0.6
0.4
Indonesia
3M
7.2
7.3
7.1
7.6
7.1
7.5
7.1
India
3M
8.9
8.2
9.3
8.0
8.8
8.0
8.8
Taiwan
3M
0.9
0.9
0.8
1.0
0.8
0.9
0.8
2.9
Korea
3M
2.7
2.7
2.6
2.8
2.6
2.9
Philippines
3M
0.1
0.9
0.9
1.2
0.9
2.0
1.4
Singapore
3M
0.4
0.4
0.5
0.4
0.5
0.6
0.5
Thailand
3M
2.6
2.8
2.6
3.0
2.6
2.9
3.1
Close 09 October 13, mid-rates for major markets. We are currently using December 2013, March 2014 and September 2014 contracts for 3-month forward rates. Source: Goldman Sachs
Global Investment Research
46
October 10, 2013
Recommended FX Trade Ideas

Our Recommended Top Trades for 2013
Trade
Potential Gain
Opened
At
Now At
1. Close short AUD/NOK
03-Dec-12
5.90
na
2. Close long risk on CDX HY
04-Dec-12
506
na
3.0 %
3. Close long Commodity Carry Basket
05-Dec-12
100
na
-6.0 %
3.8 %
4. Close long Spanish 5-yr Sovereign Bond
06-Dec-12
4.29
na
5.5 %
5. Close long Large Cap US Banks
07-Dec-12
49.02
na
27 %
6. Long Current Account Current
10-Dec-12
84.50
86.06
1.8 %
7. Close long WF GDP Growth Basket
11-Dec-12
79.95
na
-5.4 %
8. Close Short COMEX Gold
10-Apr-13
1585
na
10.4 %
9. Long FTSE 100 Dec 13 Future
05-Jul-13
6333
6336
0.0 %
Tactical FX Trade Performance 2012 and 2013
Cumulative Return of Tactical Recommendations

70%
2013
All Trades
Number
17
Cum Return
-23.5%
Avg Return
-1.38%
Avg Duration
30 days
60%
Profitable
4.3%
1.43%
34 days
50%
Loss-Making
14
-27.8%
-1.99%
29 days
40%
Number
13
7
6
Cum Return
6.6%
18.2%
-11.6%
Avg Return
0.50%
2.59%
-1.93%
Avg Duration
30 days
38 days
20 days
Sum of potential p/l
30%
2012
All Trades
Profitable
Loss-Making
20%
10%
0%
-10%
-20%
07
08
09
10
11
12
13
14
Recent Tactical FX Recommendations

Description
Long
Long
Long
Short
Long
Long
Long
EUR
EUR
EUR
USD
CAD
USD
EUR
CZK
CAD
USD
CLP (expiry 22Jan14)
MXN
INR (expiry 5Jun13)
GBP
Long
Short
Long
Short
Long
Long
Long
Long
Long
Short
EUR
USD
EUR
GBP
EUR
USD
EUR
PLN
GBP
USD
HUF
BRL (expiry 21Apr14)
GBP
NOK
USD
EM Basket (TRY,BRL,ZAR,CLP,INR)
INR
TRY
ZAR
JPY
Open
Close
Day
31-Dec-12
31-Dec-12
11-Jan-13
17-Jan-13
28-Jan-13
01-Mar-13
12-Mar-13
Time
"17:00"
"17:00"
"13:07"
"14:40"
"17:55"
"1:39"
"13:03"
Day
06-Feb-13
11-Jan-13
01-Feb-13
01-Mar-13
25-Feb-13
10-May-13
19-Mar-13
Time
"14:48"
"12:47"
"16:51"
"13:16"
"12:49"
"5:02"
"17:00"
Open Quote
Close Quote
25.1000
1.3126
1.3273
494.9000
12.6680
55.6800
0.8754
25.3360
1.3055
1.3694
494.0000
12.3812
54.7000
0.8506
Potential
Return
0.94%
-0.54%
3.17%
0.18%
-2.60%
-2.16%
-2.83%
18-Apr-13
"12:25"
21-May-13
"17:00"
297.0000
289.8900
-2.39%
19-Apr-13
08-May-13
27-Jun-13
01-Jul-13
05-Jul-13
30-Sep-13
30-Sep-13
01-Oct-13
03-Oct-13
"14:43"
"16:42"
"23:55"
"16:36"
"14:49"
"5:42"
"12:41"
"13:01"
"16:48"
23-May-13
04-Sep-13
21-Aug-13
09-Jul-13
17-Jul-13
10-Oct-13
09-Oct-13
10-Oct-13
10-Oct-13
"17:00"
"10:40"
"17:00"
"17:00"
"17:00"
"17:23"
"17:00"
"17:00"
"17:23"
2.1240
0.8462
9.2163
1.3056
100.0000
84.6180
0.6509
16.3116
97.2200
2.1660
0.8442
9.4956
1.2773
97.8000
82.8822
0.6394
15.8002
98.0500
-1.94%
-0.24%
-2.94%
-2.17%
-2.20%
-2.04%
-1.78%
-3.14%
-0.87%
Please see our Global Markets Daily and Trade Updates for changes in these live trading strategies, as they change
in line with market developments and our views.
47
October 10, 2013
FX Currents
Relative Performance of High Yielding Currencies
155
Index,
1/1/04=100
Goldman Sachs FX G10 &

Emerging Markets Carry Index
145
135
125
The Carry FX Current (Bloomberg: GSIMCAR1 Index) is

built to capture the performance of carry-based trading
strategies in FX. In the long run, the return on holding high
carry currencies tends to outperform low carry currencies.
However, at times of high risk aversion, carry trades tend to
post heavy losses. The Carry FX Current is down 2.2% in 2013.
Composition of the Carry Current
Short
CHF
CZK
JPY
TWD
EUR
PHP
115
105
Long
CLP
RUB
BRL
IDR
INR
TRY
95
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative Performance of Currencies in Current

Account Surplus FX
103
101
Index,
1/1/04=100
Goldman Sachs FX Current Account

Index
99
97
The Current Account FX Current (Bloomberg: GSIMCAC1

Index) aims to capture the performance of current account
geared trading strategies in FX. In an environment of slower
global capital flows and rising interest rates in DMs, one
would expect current account surplus currencies to
outperform current account deficit currencies. The Current
Account FX Current is up 2.0% in 2013.
95
93
Composition of Current Account Current
91
89
87
85
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative Performance of Undervalued FX Based on

GSDEER Valuation
110
108
Index,
1/1/04=100
Goldman Sachs FX Valuation Index
106
Short
INR
NZD
TRY
ZAR
CLP
GBP
Long
KRW
SEK
CHF
NOK
SGD
TWD
The Valuation Current (Bloomberg: GSIMVAL1 Index) is our

FX Current built to capture the performance of undervalued
currencies relative to overvalued currencies, using our
GSDEER model as a valuation anchor. The Valuation Current
is down 0.3% in 2013.
104
102
100
98
96
94
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Composition of Valuation Current

Short
BRL
KRW
NZD
PHP
CHF
RUB
Long
SGD
CLP
MYR
NOK
TWD
ZAR

Methodology: Our FX Currents, formerly FX Slices, are portfolios of currencies adjusted for carry and are designed to capture and identify themes that the
market is trading. For some, the composition is adjusted on a monthly or a rolling 3-month basis according to the evolution of the ranking in the macro
variables. A ranking schedule is used to generate weights for the currencies. The BRICs/N-11 FX Current has a static, equally-weighted composition. See
our Global Viewpoint from July 20, 2009, and our 2005 and 2006 issues of The Foreign Exchange Market for details.
48
October 10, 2013
FX Currents
Relative Performance of High Growth FX
111
109
Index,
1/1/04=100
Goldman Sachs FX Growth Index
107
105
103
101
Composition of GDP Current
99
97
95
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative Performance of Selected Energy-Exporting to

Importing Currencies
121
Index,
1/1/04=100
Goldman Sachs FX Energy Currencies

Index
116
111
106
96
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative Performance of BRIC/N11 Currencies to G10

Currencies
116
Short
CZK
INR
PLN
RUB
CNY
GBP
Long
JPY
CHF
ILS
NOK
NZD
PHP
This Energy FX Current (Bloomberg: GSIMENE1 Index) is

created to take advantage of terms-of-trade gains and losses
from shifts in energy prices between commodity producers
and commodity consumers. Basically, this Current is long a
list of currencies from energy-exporting countries and short a
portfolio of currencies that are heavy importers of energy
products. The Energy FX Current is down 0.2% in 2013.
Composition of the Energy Current
101
118
The GDP FX Current (Bloomberg: GSIMGDP1 Index) is built

to capture the performance of currencies from high cyclical
growth economies relative to currencies from low cyclical
growth economies. In theory, strong cyclical growth should
lead to FX outperformance. Growth was one of the bestperforming themes from the beginning of July 2007 through
May 2010. It reversed direction in mid-2010 and fell more than
4.5% in 2011, but recovered around 2% in 2012. The GDP FX
Current is down 1.0% in 2013.
Index,
1/1/04=100
Goldman Sachs FX BRIC/N11core5 Index
114
112
110
108
106
104
102
100
98
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Short
INR
JPY
KRW
SGD
TWD
Long
AUD
CAD
MXN
NOK
RUB
The BRICs/N-11 FX Current (Bloomberg: GSIMBRI1 Index)

measures the outperformance of the BRICs and N-11
currencies against the G10 currencies. As the BRICs and N-11
are the emerging markets with the most substantial long-term
growth potential, we would generally be inclined to
recommend trading this Current from the long side. However,
the BRICs/N-11 trade can come under pressure when global
growth slows. The BRICs/N-11 Current is down 0.3% in 2013.
Composition of the BRIC/N11 Current
Short
AUD
CAD
CHF
EUR
GBP
JPY
NOK
NZD
SEK
Long
BRL
CNY
IDR
INR
KRW
MXN
PHP
RUB
TRY
49
October 10, 2013
Forecasts for Nominal GS TWIs
Jan 1980=100
Year Average
Latest
Forecasts
GSDEER TWI
% Change from spot
2010
2011
2012
09-Oct-13
3m
6m
12m
2015
2016
3m
6m
12m
2015
2016
current
Misal*
US Dollar
91.2
87.2
89.0
91.7
91.8
91.6
91.4
92.2
93.0
0.1
-0.1
-0.3
0.5
1.5
101.1
-9.3
Euro
121.7
122.4
118.2
124.5
126.0
127.9
128.9
125.0
116.8
1.2
2.7
3.6
0.4
-6.2
118.5
5.0
Japanese Yen
105.8
111.9
112.5
93.0
93.4
88.7
85.4
85.1
85.9
0.4
-4.6
-8.3
-8.5
-7.7
94.7
-1.8
British Pound
78.6
78.2
80.5
80.5
84.0
83.6
81.7
80.6
75.3
4.3
3.8
1.5
0.1
-6.5
81.7
-1.5
Norwegian Kroner
111.7
114.6
115.1
109.5
114.9
118.6
122.4
133.0
126.1
4.9
8.3
11.8
21.4
15.2
152.2
-28.1
Swedish Krona
96.2
101.8
101.8
105.5
109.5
111.0
111.2
118.7
115.4
3.7
5.2
5.4
12.5
9.3
109.9
-4.0
Swiss Franc
125.0
140.6
140.9
140.8
139.6
137.3
137.7
133.8
125.0
-0.9
-2.5
-2.2
-4.9
-11.2
125.6
12.1
Czech Koruna
150.0
154.4
150.2
148.3
147.1
147.7
150.1
162.2
158.3
-0.8
-0.4
1.2
9.3
6.7
159.7
-7.1
Hungarian Forint
98.0
97.0
90.3
91.4
90.4
89.3
88.2
87.6
81.8
-1.1
-2.3
-3.5
-4.1
-10.4
90.7
0.7
Polish Zloty
111.8
108.8
104.9
107.0
105.6
106.0
107.7
115.6
109.4
-1.3
-0.9
0.7
8.0
2.3
122.7
-12.8
Russian Ruble
73.9
73.2
74.4
68.6
69.7
70.0
68.5
68.8
69.5
1.6
2.1
-0.1
0.4
1.3
65.2
5.1
Turkish Lira
31.1
26.7
25.8
23.3
21.8
20.7
19.0
18.6
18.8
-6.7
-11.4
-18.4
-20.3
-19.5
21.7
7.5
Israeli Shekel
100.7
101.5
98.8
105.5
104.3
105.8
109.4
109.6
110.6
-1.1
0.3
3.7
3.9
4.9
104.1
1.3
South African Rand
72.2
69.8
66.1
53.1
52.1
51.2
50.4
48.4
46.7
-1.9
-3.6
-5.2
-8.9
-12.1
82.3
-35.4
Argentine Peso
23.6
21.4
21.1
17.0
16.3
15.4
13.9
12.7
11.3
-4.5
-9.4
-18.4
-25.3
-33.7
33.3
-48.9
Brazilian Real
117.7
120.5
113.6
97.1
95.8
94.2
91.3
81.5
77.9
-1.3
-3.0
-5.9
-16.1
-19.8
75.4
28.8
Canadian Dollar
137.3
141.0
140.3
135.1
133.2
135.9
140.1
141.2
142.5
-1.4
0.6
3.7
4.5
5.5
125.6
7.6
Mexican Peso
70.5
70.7
67.4
67.1
68.5
69.1
70.3
70.6
71.2
2.2
3.0
4.8
5.2
6.2
69.6
-3.7
Chilean Peso
111.2
113.5
114.2
116.2
112.7
111.5
111.8
108.5
107.5
-3.0
-4.1
-3.8
-6.7
-7.5
138.6
-16.2
Peruvian New Sol
125.6
123.8
129.3
127.5
127.7
126.2
127.2
113.7
109.6
0.2
-1.0
-0.2
-10.8
-14.0
115.3
10.6
Colombian Peso
115.9
116.4
122.3
119.0
115.8
113.2
111.0
108.2
106.7
-2.7
-4.9
-6.7
-9.1
-10.4
114.2
4.3
Venezuela Bolivar
15.0
14.4
14.6
10.2
10.2
10.2
10.2
10.3
10.4
0.0
0.0
0.0
0.5
1.5
10.3
-1.0
Australian Dollar
125.7
134.4
137.0
128.0
123.4
121.4
117.6
115.8
115.5
-3.6
-5.2
-8.1
-9.5
-9.8
120.8
6.0
Chinese Yuan
112.6
112.4
117.6
126.3
127.2
128.2
128.9
123.8
123.0
0.8
1.5
2.0
-2.0
-2.6
117.5
7.5
Hong Kong Dollar
86.9
82.6
82.7
83.1
83.2
83.4
83.5
83.1
83.8
0.1
0.3
0.5
0.0
0.9
110.9
-25.0
Indian Rupee
83.7
78.8
73.0
61.7
54.9
53.4
55.2
55.7
56.2
-11.1
-13.4
-10.6
-9.7
-8.9
58.7
5.2
Korean Won
88.3
88.1
86.6
95.1
95.6
94.3
94.7
93.5
89.5
0.5
-0.9
-0.4
-1.7
-5.9
81.4
16.8
Malaysian Ringgit
108.3
108.7
109.7
109.0
104.0
107.7
111.4
116.8
126.3
-4.7
-1.2
2.2
7.1
15.8
143.0
-23.7
New Zealand Dollar
118.1
121.8
125.7
133.3
125.4
126.2
125.6
117.8
110.7
-5.9
-5.4
-5.8
-11.7
-16.9
116.7
14.2
Singapore Dollar
110.1
114.1
115.2
120.4
120.9
123.0
124.7
126.2
132.9
0.4
2.1
3.6
4.8
10.3
138.4
-13.0
Taiwan Dollar
89.2
91.0
90.8
94.5
92.6
93.1
93.6
93.2
94.0
-2.1
-1.5
-1.0
-1.4
-0.5
122.4
-22.7
Thai Baht
105.3
103.7
103.0
106.6
102.7
105.1
107.4
105.2
109.6
-3.6
-1.4
0.7
-1.3
2.9
96.8
10.1
Indonesian Rupiah
68.6
67.3
65.3
55.8
52.6
52.9
54.0
56.8
60.0
-5.7
-5.1
-3.3
1.8
7.7
59.2
-5.7
Philippine Peso
80.5
79.8
81.3
83.4
83.7
86.6
91.9
90.4
89.0
0.3
3.8
10.2
8.4
6.7
69.4
20.1
*Spot misalignment from GSDEER TWI in %.

50
October 10, 2013
GS TWI: US Dollar
GS TWI: Euro
120
100
140
Index
1980=100
Index
1980=100
120
TWI
Appreciation
TWI
Appreciation
100
80
80
60
60
40
40
Nominal TWI
Nominal TWI
20
0
GSDEER TWI
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
GS TWI: Japanese Yen
100
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
GS TWI: Sterling
140
120
GSDEER TWI
20
130
Index
1980=100
120
TWI
Appreciation
Index
1980=100
TWI
Appreciation
110
80
100
60
90
80
40
Nominal TWI
GSDEER TWI
20
0
GSDEER TWI
60
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
GS TWI: Swiss Franc

160
150
140
Nominal TWI
70
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
GS TWI: Australian Dollar

190
Index
1980=100
Index
1980=100
170
TWI
Appreciation
150
130
TWI
Appreciation
130
120
110
110
90
100
Nominal TWI
90
Nominal TWI
70
GSDEER TWI
GSDEER TWI
80
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
GS TWI: Chinese Yuan

410
360
310
50
GS TWI: Brazilian Real

200
Index
1980=100
TWI
Appreciation
160
140
210
120
160
100
110
TWI
Appreciation
80
Nominal TWI
GSDEER TWI
10
Index
1980=100
180
260
60
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Nominal TWI
GSDEER TWI
60
40
94
96
98
00
02
04
06
08
10
12
14
16
51
October 10, 2013
M&A Flows
Cash M&A Pipeline: Net bilateral: United States & REST
OF WORLD
100
US$ bn
80
Cash M&A Pipeline: Net bilateral: Euro area & REST OF

WORLD
20
US$ bn
0
60
-20
40
20
-40
-60
-20
-40
-60
-80
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-100
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending United States outflow = -ve; Latest: US$ -28.7bn
*Pending Euro area outflow = -ve; Latest: US$ -14.8bn
Cash M&A Pipeline: Net bilateral: Japan & REST OF

WORLD
Cash M&A Pipeline: Net bilateral: Canada & REST OF

WORLD
25
20
US$ bn
20
10
US$ bn
15
10
-10
-20
0
-30
-5
-40
-10
-50
-60
-15
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-20
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending Japan outflow = -ve; Latest: US$ -27bn
*Pending Canada outflow = -ve; Latest: US$ -13.4bn
Cash M&A Pipeline: Net bilateral: Switzerland & REST OF

WORLD
Cash M&A Pipeline: Net bilateral: United Kingdom &

REST OF WORLD
60
30
US$ bn
US$ bn
20
40
10
20
0
-10
-20
-20
-30
-40
-40
-60
-50
-60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending Switzerland outflow = -ve; Latest: US$ -5.8bn
-80
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending United Kingdom outflow = -ve; Latest: US$ -5.6bn
M&A Cash Pipelines show the value of the cash parts in all pending cross-border acquisitions. They represent potential flows, not actual flows. If a deal is withdrawn,
it will be removed from the pipeline. The pipeline provides no information on the timing of foreign exchange flows.
Source: Thomson Financial SDC, Goldman Sachs Global Investment Research.
52
October 10, 2013
M&A Flows
Cash M&A Pipeline: Net bilateral: Australia & REST OF
WORLD
25
US$ bn
Cash M&A Pipeline: Net bilateral: New Zealand & REST

OF WORLD
4
US$ bn
20
15
10
-1
-5
-2
-10
-3
-15
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-4
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending Australia outflow = -ve; Latest: US$ 15.4bn
*Pending New Zealand outflow = -ve; Latest: US$ 2.5bn
Cash M&A Pipeline: Net bilateral: Sweden & REST OF

WORLD
Cash M&A Pipeline: Net bilateral: Norway & REST OF

WORLD
8
15
US$ bn
US$ bn
10
-5
-10
-2
-15
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-4
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
5.*Pending Sweden outflow = -ve; Latest: US$ -2.4bn
*Pending Norway outflow = -ve; Latest: US$ 3.8bn
Cash M&A Pipeline: Net bilateral: China & REST OF

WORLD
Cash M&A Pipeline: Net bilateral: India & REST OF

WORLD
30
40
US$ bn
35
US$ bn
25
30
20
25
20
15
15
10
10
0
-5
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending China outflow = -ve; Latest: US$ 17.2bn
-5
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
*Pending India outflow = -ve; Latest: US$ 1.1bn
M&A Cash Pipelines show the value of the cash parts in all pending cross-border acquisitions. They represent potential flows, not actual flows. If a deal is withdrawn,
it will be removed from the pipeline. The pipeline provides no information on the timing of foreign exchange flows.
Source: Thomson Financial SDC, Goldman Sachs Global Investment Research.
53
October 10, 2013
GSDEER
GSDEER Values and Misalignment for USD Crosses
GSDEER
Spot
G3
EUR/$
$/JPY
EMEA
/$
$/NOK
$/SEK
$/CHF
$/CZK
$/HUF
$/PLN
$/RUB
$/TRY
$/ILS
$/ZAR
Americas
$/ARS
$/BRL
$/CAD
$/MXN
$/CLP
$/PEN
$/COP
$/VEF
Asia
AUD/$
$/CNY
$/HKD
$/INR
$/KRW
$/MYR
NZD/$
$/SGD
$/TWD
$/THB
$/IDR
$/PHP
USD TWI
Misalignment
Trade-
09-Oct-13
Current
(4Q13)*
4Q13
4Q14
4Q15
4Q16
Bilateral1
1.35
97.4
1.19
104.4
1.19
104.4
1.19
104.8
1.19
105.0
1.18
103.2
13.8%
7.2%
-1.8%
1.60
5.99
6.47
0.91
18.9
219
3.10
32.3
1.98
3.56
9.96
1.47
4.73
6.69
1.14
19.7
250
3.05
39.0
2.43
3.99
7.22
1.47
4.73
6.69
1.14
19.7
250
3.05
39.0
2.43
3.99
7.22
1.46
4.77
6.64
1.14
19.5
248
3.05
40.0
2.59
4.04
7.52
1.47
4.85
6.65
1.14
19.4
249
3.02
41.1
2.71
4.07
7.82
1.46
5.09
6.66
1.14
19.4
252
3.01
43.2
2.86
4.07
8.05
8.7%
-21.1%
3.4%
25.5%
4.3%
14.0%
-1.8%
20.7%
22.8%
11.8%
-27.5%
-1.5%
-28.1%
-4.0%
12.1%
-7.1%
0.7%
-12.8%
5.1%
7.5%
1.3%
-35.4%
5.82
2.21
1.04
13.2
501
2.79
1891
6.29
3.44
2.92
1.16
13.4
443
3.32
2063
6.60
3.44
2.92
1.16
13.4
443
3.32
2063
6.60
3.85
3.05
1.16
13.5
456
3.31
2132
8.98
4.26
3.13
1.16
13.7
450
3.21
2176
11.32
4.72
3.22
1.17
14.0
459
3.18
2216
13.69
-40.9%
32.5%
11.7%
1.5%
-11.5%
19.1%
9.1%
4.9%
-48.9%
28.8%
7.6%
-3.7%
-16.2%
10.6%
4.3%
-1.0%
0.94
6.14
7.75
61.8
1075
3.19
0.83
1.25
29.4
31.4
11140
43.1
91.69
0.81
7.20
6.51
71.6
1364
2.67
0.65
1.19
25.2
37.4
11582
56.1
101.13
0.81
7.20
6.51
71.6
1364
2.67
0.65
1.19
25.2
37.4
11582
56.1
101.13
0.77
7.10
6.58
73.7
1345
2.67
0.63
1.20
24.8
37.6
11866
56.6
101.81
0.74
7.06
6.67
75.2
1342
2.69
0.63
1.21
24.7
37.8
12169
57.6
102.44
0.73
6.98
6.74
75.7
1325
2.72
0.63
1.21
24.5
37.8
12636
58.9
17.0%
17.2%
-16.1%
15.8%
26.8%
-16.6%
28.1%
-4.8%
-14.3%
19.1%
4.0%
30.1%
6.0%
7.5%
-25.0%
5.2%
16.8%
-23.7%
14.2%
-13.0%
-22.7%
10.1%
-5.7%
20.1%
-9.3%
Weighted
Bilateral misalignments are reported for the second currency in the pair with the exception of EUR/$, GBP/$, AUD/$, and NZD/$. A negative misalignment indicates
that a currency is undervalued relative to its anchor currency. A negative trade-weighted misalignment indicates that a currency is undervalued on a broad basis. That
is, the $/JPY bilateral misalignment shows the misalignment of the JPY against the USD, with a negative figure indicating undervaluation of the JPY.
* "Current" represents the current quarter, the column left of current represents the last quarter to be updated with over 75% of actual data.
54
October 10, 2013
GSDEER
GSDEER Values and Misalignment for Euro Crosses
GSDEER
Spot
G3
EUR/$
EUR/JPY
EMEA
EUR/GBP
EUR/NOK
EUR/SEK
EUR/CHF
EUR/CZK
EUR/HUF
EUR/PLN
EUR/RUB
EUR/TRY
EUR/ILS
EUR/ZAR
Americas
EUR/ARS
EUR/BRL
EUR/CAD
EUR/MXN
EUR/CLP
EUR/PEN
EUR/COP
EUR/VEF
Asia
EUR/AUD
EUR/CNY
EUR/HKD
EUR/INR
EUR/KRW
EUR/MYR
EUR/NZD
EUR/SGD
EUR/TWD
EUR/THB
EUR/IDR
EUR/PHP
EUR TWI
Misalignment
TradeWeighted1
09-Oct-13
Current
(4Q13)*
4Q13
4Q14
4Q15
4Q16
Bilateral1
1.35
131.7
1.19
124.0
1.19
124.0
1.19
124.7
1.19
124.8
1.18
122.3
13.8%
-5.8%
-1.8%
0.85
8.11
8.74
1.23
25.6
296
4.20
43.7
2.68
4.82
13.47
0.81
5.62
7.95
1.36
23.5
297
3.62
46.4
2.89
4.74
8.58
0.81
5.62
7.95
1.36
23.5
297
3.62
46.4
2.89
4.74
8.58
0.81
5.68
7.90
1.35
23.2
295
3.63
47.7
3.08
4.81
8.95
0.81
5.76
7.90
1.35
23.1
296
3.59
48.8
3.22
4.84
9.30
0.81
6.02
7.89
1.35
23.0
298
3.57
51.2
3.39
4.82
9.53
-4.4%
-30.6%
-9.1%
10.4%
-8.4%
0.2%
-13.6%
6.1%
7.9%
-1.7%
-36.3%
-1.5%
-28.1%
-4.0%
12.1%
-7.1%
0.7%
-12.8%
5.1%
7.5%
1.3%
-35.4%
7.87
2.98
1.41
17.8
678
3.77
2558
8.50
4.09
3.47
1.38
15.9
527
3.95
2452
7.84
4.09
3.47
1.38
15.9
527
3.95
2452
7.84
4.58
3.63
1.38
16.1
543
3.94
2537
10.69
5.06
3.72
1.38
16.3
534
3.82
2587
13.45
5.59
3.82
1.38
16.6
544
3.77
2625
16.22
-48.0%
16.5%
-1.8%
-10.8%
-22.2%
4.6%
-4.1%
-7.8%
-48.9%
28.8%
7.6%
-3.7%
-16.2%
10.6%
4.3%
-1.0%
1.43
8.30
10.49
83.6
1454
4.32
1.63
1.69
39.8
42.5
15063
58.3
124.48
1.47
8.55
7.73
85.1
1621
3.17
1.83
1.42
30.0
44.5
13766
66.7
118.53
1.47
8.55
7.73
85.1
1621
3.17
1.83
1.42
30.0
44.5
13766
66.7
118.53
1.55
8.45
7.83
87.7
1600
3.17
1.88
1.43
29.5
44.7
14118
67.4
119.16
1.61
8.39
7.93
89.4
1595
3.19
1.87
1.43
29.4
44.9
14464
68.5
119.58
1.63
8.27
7.99
89.7
1569
3.22
1.88
1.43
29.0
44.8
14968
69.8
2.9%
3.0%
-26.3%
1.7%
11.5%
-26.7%
12.6%
-16.3%
-24.6%
4.7%
-8.6%
14.3%
6.0%
7.5%
-25.0%
5.2%
16.8%
-23.7%
14.2%
-13.0%
-22.7%
10.1%
-5.7%
20.1%
5.0%
Bilateral misalignments are reported for the second currency in the pair with the exception of EUR/$, GBP/$, AUD/$, and NZD/$. A negative misalignment indicates
that a currency is undervalued relative to its anchor currency. A negative trade-weighted misalignment indicates that a currency is undervalued on a broad basis. That
is, the $/JPY bilateral misalignment shows the misalignment of the JPY against the USD, with a negative figure indicating undervaluation of the JPY.
* "Current" represents the current quarter, the column left of current represents the last quarter to be updated with over 75% of actual data.
55
October 10, 2013
Key Economic Data

GDP Growth (%ch yoy)
% ch yoy
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13 (f)
14 (f)
15 (f)
16 (f)
USA
4.85
4.09
0.95
1.78
2.79
3.80
3.35
2.67
1.79
-0.29
-2.80
2.51
1.85
2.78
1.56
2.88
3.19
3.00
Euro area
2.81
3.95
2.00
0.91
0.72
1.98
1.80
3.36
2.99
0.26
-4.36
1.90
1.59
-0.58
-0.36
0.87
1.25
1.47
Japan
-0.20
2.26
0.36
0.29
1.69
2.36
1.30
1.69
2.19
-1.04
-5.53
4.65
-0.58
1.96
1.78
1.57
1.15
1.54
G3
EMEA
Czech Republic
1.51
4.55
3.08
2.05
3.76
4.58
6.83
7.22
5.72
2.91
-4.36
2.31
1.83
-1.15
-1.04
1.90
2.40
2.51
France
3.19
3.86
1.80
0.94
0.88
2.34
1.85
2.69
2.25
-0.20
-3.07
1.65
2.02
0.05
0.02
0.52
1.03
1.30
Germany
1.74
3.30
1.64
0.03
-0.39
0.69
0.85
3.89
3.39
0.80
-5.09
3.86
3.40
0.90
0.58
1.99
2.14
2.22
Hungary
4.20
5.20
3.80
3.50
3.83
4.70
4.06
3.82
0.14
0.79
-6.69
1.32
1.68
-1.71
0.50
1.40
1.85
1.89
Israel
3.39
9.27
-0.25
-0.58
1.51
4.84
4.94
5.59
5.50
4.03
1.21
4.98
4.60
3.20
3.60
3.60
3.18
4.00
Italy
1.42
3.89
1.76
0.45
0.03
1.56
1.09
2.27
1.55
-1.16
-5.51
1.68
0.49
-2.39
-1.84
0.43
0.85
1.01
Norway
2.01
3.27
1.99
1.51
0.99
3.95
2.59
2.44
2.65
-0.01
-1.39
0.24
1.31
3.02
1.00
2.36
1.87
1.86
Poland
4.10
4.04
1.02
1.37
3.80
5.45
3.60
6.18
6.82
5.01
1.61
3.87
4.53
1.91
0.96
2.84
3.43
3.54
Russia
6.40
10.00
5.10
4.70
7.30
7.20
6.40
8.20
8.50
5.20
-7.80
4.49
4.29
3.44
2.69
3.46
3.74
3.07
South Africa
2.36
4.15
2.74
3.67
2.95
4.55
5.28
5.60
5.55
3.62
-1.53
3.09
3.46
2.55
2.16
3.38
3.82
3.18
Spain
4.75
5.09
3.67
2.71
3.09
3.26
3.59
4.07
3.48
0.89
-3.83
-0.20
0.05
-1.64
-1.37
0.04
0.96
1.81
Sweden
4.40
4.59
1.41
2.50
2.47
3.72
3.16
4.55
3.43
-0.76
-4.98
6.27
3.77
1.08
1.43
2.78
2.97
2.82
Switzerland
1.40
3.67
1.24
0.19
0.02
2.42
2.69
3.75
3.85
2.16
-1.94
2.95
1.79
1.05
1.78
1.39
1.41
1.51
Turkey
-3.40
6.80
-5.70
6.20
5.30
9.40
8.40
6.90
4.70
0.70
-4.80
9.20
8.80
2.20
4.50
2.70
3.70
3.00
UK
2.94
4.36
2.18
2.30
3.95
3.17
3.23
2.76
3.43
-0.77
-5.17
1.66
1.12
0.17
1.37
2.34
2.48
2.68
0.00
5.27
9.67
12.18
3.17
7.29
7.90
2.77
-14.83
4.21
5.13
0.20
-1.83
7.17
3.82
3.92
Argentina
-3.39
-0.79
-4.41
-10.89
8.84
9.03
9.18
8.47
8.65
6.76
0.85
9.16
8.87
1.90
4.20
2.76
2.44
2.68
Brazil
0.25
4.31
1.31
2.66
1.15
5.71
3.16
3.96
6.10
5.17
-0.33
7.53
2.73
0.87
2.56
2.32
3.20
3.37
Canada
5.00
5.12
1.69
2.80
1.93
3.14
3.16
2.62
2.01
1.18
-2.71
3.37
2.53
1.71
1.94
2.75
2.69
2.50
Chile
-1.10
5.12
3.27
2.69
3.77
7.02
6.18
5.69
5.16
3.29
-1.04
5.76
5.85
5.56
4.20
4.14
4.60
4.60
Colombia
-4.20
3.12
1.68
2.50
3.92
5.33
4.71
6.70
6.90
3.55
1.65
3.97
6.65
3.96
4.16
4.80
4.65
4.61
Mexico
3.87
6.60
-0.16
0.83
1.35
4.30
3.03
5.00
3.15
1.40
-4.70
5.07
3.98
3.78
2.15
3.50
3.56
3.60
Peru
0.89
2.95
0.21
5.16
3.90
5.22
6.45
7.87
8.91
9.80
0.86
8.76
6.86
6.28
5.29
6.00
6.07
6.00
Venezuela
-6.09
3.69
3.39
-8.86
-7.76
18.29
10.32
9.87
8.75
5.28
-3.20
-1.49
4.18
5.63
1.67
2.45
2.57
1.02
Australia
4.06
3.19
2.54
4.06
3.05
4.09
3.11
2.72
4.63
2.67
1.42
2.63
2.42
3.67
2.24
1.90
2.42
3.69
China
7.63
8.42
8.30
9.09
10.02
10.10
11.30
12.70
14.20
9.60
9.20
10.40
9.30
7.80
7.60
7.70
7.80
7.80
Ukraine
AMERICAS
ASIA
Hong Kong
2.60
7.90
0.50
1.80
3.00
8.50
7.10
7.00
6.40
2.30
-2.50
6.80
4.90
1.50
3.20
3.40
4.50
4.20
India
6.30
5.60
4.60
4.60
7.40
7.00
9.00
9.60
9.70
8.10
6.40
9.70
7.50
5.10
4.20
5.00
7.20
7.50
Indonesia
0.80
4.10
3.60
4.50
4.80
5.00
5.70
5.50
6.30
6.00
4.60
6.10
6.50
6.20
5.40
5.50
6.40
6.70
South Korea
10.89
9.30
3.10
7.00
3.10
4.70
4.20
5.10
5.10
2.30
0.30
6.30
3.70
2.00
2.70
3.50
3.80
3.80
Malaysia
6.10
8.30
0.30
4.40
5.30
7.23
5.00
5.80
6.20
4.70
-1.60
7.20
5.10
5.60
4.60
4.80
5.20
5.50
New Zealand
4.64
4.15
2.56
4.91
4.18
4.40
3.18
2.92
3.45
-0.80
-1.46
1.88
1.40
2.65
2.42
2.50
1.74
2.58
Philippines
3.40
6.00
1.80
4.40
4.90
6.40
5.00
5.30
7.10
3.80
1.10
7.30
3.60
6.80
6.80
5.50
5.60
5.80
Singapore
7.20
10.00
-2.30
4.00
2.90
8.70
6.60
8.60
7.80
1.80
-1.00
14.80
5.20
1.30
2.30
3.20
4.20
4.50
Taiwan
5.42
5.90
-2.20
3.60
3.30
6.07
4.10
4.90
5.70
0.70
-1.80
10.70
4.10
1.25
2.80
3.90
4.00
4.00
Thailand
4.40
4.80
2.20
5.30
7.10
6.30
4.60
5.10
4.90
2.50
-2.30
7.80
0.10
6.50
4.00
4.30
5.10
5.60
56
October 10, 2013
Consumer Prices (%ch yoy)

% ch yoy
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13 (f)
14 (f)
15 (f)
16 (f)
3.37
2.82
1.60
2.30
2.67
3.37
3.22
2.87
3.81
-0.32
1.64
3.14
2.08
1.56
1.80
1.90
2.09
G3
USA
Euro area
2.19
1.12
2.10
2.34
2.25
2.08
2.18
2.18
2.18
2.14
3.28
0.30
1.62
2.72
2.50
1.53
1.48
1.61
1.84
-0.33
-0.65
-0.80
-0.90
-0.25
-0.01
-0.27
0.24
0.06
1.37
-1.34
-0.72
-0.28
-0.03
0.08
2.26
1.70
2.08
Czech Republic
2.13
3.90
4.69
1.81
0.10
2.82
1.87
2.53
2.83
6.37
1.04
1.47
1.93
3.30
1.47
1.57
1.70
1.75
France
0.56
1.83
1.78
1.94
2.17
2.34
1.90
1.91
1.61
3.15
0.10
1.74
2.29
2.22
1.09
1.54
1.22
1.46
2.95
Japan
EMEA
Germany
0.64
1.40
1.90
1.35
1.03
1.79
1.92
1.78
2.28
2.75
0.23
1.15
2.48
2.14
1.78
1.99
2.52
Hungary
10.01
9.78
9.18
5.28
4.67
6.74
3.57
3.91
7.99
6.05
4.19
4.88
3.94
5.67
2.13
2.40
2.63
2.99
5.25
1.13
1.12
5.68
0.73
-0.40
1.33
2.12
0.52
4.59
3.32
2.70
3.50
1.70
1.80
2.48
2.29
1.70
Israel
Italy
1.66
2.58
2.32
2.61
2.81
2.27
2.21
2.22
2.04
3.50
0.76
1.64
2.90
3.30
1.57
1.27
1.42
1.53
Norway
2.33
3.09
3.02
1.29
2.48
0.47
1.52
2.33
0.73
3.77
2.17
2.40
1.30
0.71
1.99
1.89
2.09
2.40
Poland
7.23 10.10
5.50
1.99
0.90
3.49
2.13
1.03
2.49
4.22
3.45
2.58
4.27
3.70
1.04
1.96
1.95
2.20
Russia
9.70
9.00 14.10 11.64
6.86
8.47
5.12
6.47
5.64
5.28
4.58
South Africa
5.15
5.16
5.49
9.31
5.76
-0.87
2.11
3.18
6.08
9.91
7.16
4.27
4.99
5.66
5.72
5.10
5.40
5.07
Spain
2.23
3.48
2.83
3.59
3.10
3.05
3.38
3.56
2.84
4.13
-0.24
2.04
3.05
2.44
1.65
0.88
0.82
0.82
Sweden
0.45
0.00
2.44
2.16
1.93
0.38
0.45
1.36
2.21
3.48
-0.49
1.16
2.96
0.89
0.00
1.27
2.32
2.83
Switzerland
0.81
1.56
0.99
0.64
0.64
0.80
1.17
1.06
0.73
2.43
-0.48
0.69
0.23
-0.69
-0.26
0.93
1.09
1.59
Turkey
64.80 56.40 53.50 47.20 25.50
8.60
8.20
9.60
8.80 10.40
6.30
8.60
6.50
8.90
7.80
8.10
7.50
7.80
UK
1.34
0.79
1.24
1.26
1.36
1.34
2.05
2.33
2.32
2.17
3.29
4.48
2.82
2.63
2.37
2.01
1.74
12.25
0.77
5.23
9.02
13.55
9.06
12.78 25.26 16.03
9.38
8.00
0.58
4.38
5.29
4.46
4.32
Argentina
-1.81
-0.94
-1.07
25.87 13.44
4.42
9.64
10.90
8.83
8.58
6.27
10.46
9.78
10.04 10.77 12.60 12.43 12.00
Brazil
4.86
7.04
6.84
8.45
14.71
6.60
6.87
4.18
3.64
5.68
4.89
5.04
6.64
5.40
Canada
1.73
2.72
2.53
2.26
2.76
1.86
2.21
2.00
2.14
2.37
0.30
1.78
2.91
1.52
Chile
3.30
3.84
3.57
2.49
2.81
1.05
3.05
3.39
4.41
8.72
1.48
1.41
3.34
3.01
1.81
3.01
2.80
3.05
Colombia
9.21
9.23
7.97
6.35
7.13
5.90
5.05
4.29
5.54
7.00
4.20
2.27
3.42
3.17
2.17
3.49
3.00
3.00
Mexico
16.59
9.49
6.37
5.03
4.55
4.69
3.99
3.63
3.97
5.12
5.30
4.16
3.41
4.11
3.73
3.20
3.33
3.00
Peru
3.47
3.74
1.98
0.19
2.26
3.66
1.62
2.00
1.78
5.79
2.94
1.53
3.37
3.66
2.86
2.18
2.50
2.50
Venezuela
23.50
16.21 12.53 22.43 31.09 21.75 15.95 13.65 18.70 31.45 28.59 29.06 27.15 21.11 34.88 28.38 20.81 20.00
Ukraine
85.72 20.80 21.50 15.90 14.80 10.90 12.50
3.61
AMERICAS
6.22
5.82
5.46
4.89
ASIA
Australia
1.48
4.46
4.41
2.98
2.73
2.34
2.69
3.56
2.33
4.35
1.77
2.92
3.30
1.76
2.37
2.82
2.62
2.77
China
-1.40
0.40
0.70
-0.80
1.20
3.90
1.80
1.50
4.80
5.90
-0.70
3.30
5.40
2.60
2.50
2.60
3.00
3.00
Hong Kong
-3.99
-3.68
-1.61
-3.00
-2.50
-0.40
0.90
2.00
2.10
4.30
0.60
2.30
5.30
4.10
3.60
3.30
3.40
3.10
3.50
6.20
5.20
2.50
5.30
6.20
4.60
6.00
4.90
8.70
2.40
9.60
9.50
7.50
6.50
6.70
5.50
4.70
3.80 11.50 11.80
6.80
6.10 10.50 13.10
6.70
9.80
4.80
5.10
5.40
4.30
8.20
6.80
5.50
5.50
India
Indonesia
20.70
South Korea
0.85
2.30
4.10
2.70
3.60
3.60
2.70
2.20
2.50
4.70
2.80
2.90
4.00
2.20
1.50
2.60
2.80
2.90
Malaysia
2.80
1.50
1.40
1.80
1.20
1.44
3.00
3.60
2.00
5.40
0.60
1.70
3.20
1.70
2.30
2.40
2.80
2.80
-0.11
2.62
2.63
2.68
1.75
2.29
3.04
3.37
2.38
3.96
2.12
2.30
4.03
1.06
1.09
1.80
2.06
2.08
Philippines
5.90
4.00
6.80
2.90
3.50
6.00
7.70
6.30
2.80
9.30
3.20
4.10
4.70
3.20
3.20
3.80
3.50
3.50
Singapore
0.50
1.30
1.00
-0.40
0.50
1.70
0.50
1.00
2.10
6.60
0.60
2.80
5.20
4.60
3.00
3.30
3.50
3.20
Taiwan
0.18
1.30
0.00
-0.20
-0.30
1.61
2.30
0.60
1.80
3.50
-0.90
1.00
1.40
1.90
1.80
1.70
2.00
1.90
Thailand
0.30
1.60
1.70
0.60
1.80
2.78
4.50
4.60
2.20
5.50
-0.90
3.30
3.80
3.00
2.50
3.20
3.50
3.40
New Zealand
57
October 10, 2013
Current Account Balance (% of GDP)

99
00
01
02
03
04
05
06
07
08
09
10
11
12
13 (f)
14 (f)
15 (f)
16 (f)
USA
-3.11
-4.05
-3.73
-4.17
-4.51
-5.13
-5.65
-5.76
-4.93
-4.63
-2.65
-3.00
-2.95
-2.71
-2.61
-2.84
-3.14
-3.38
Euro area
-0.56
-1.52
-0.37
0.65
0.30
0.76
0.10
-0.20
0.10
-1.54
-0.24
-0.02
0.09
0.96
1.28
1.41
1.44
1.48
2.59
2.53
2.11
2.83
3.16
3.70
3.63
3.93
4.86
3.32
2.92
3.71
2.03
1.01
0.86
1.21
1.46
1.86
-2.57
-4.64
-5.08
-5.31
-5.98
-5.04
-0.99
-2.00
-4.28
-2.11
-2.37
-3.87
-2.72
-2.45
-1.28
-1.86
-2.14
-2.04
3.14
1.45
1.75
1.25
0.73
0.56
-0.47
-0.56
-1.00
-1.75
-1.35
-1.58
-1.96
-2.21
-2.11
-1.25
-1.09
-1.19
-1.29
-1.72
0.01
2.01
1.88
4.67
5.05
6.23
7.41
6.20
5.96
6.26
6.23
7.01
6.40
5.98
5.56
5.36
G3
Japan
EMEA
Czech Republic
France
Germany
Hungary
Israel
Italy
Norway
-8.65
-6.08
-6.99
-8.03
-8.66
-7.46
-7.40
-7.26
-7.34
-0.22
1.10
0.81
1.64
0.60
0.37
0.46
0.19
-1.72
-1.66
-1.66
-1.14
0.53
1.70
3.07
4.83
2.74
1.11
3.76
3.72
1.40
-0.08
1.63
1.85
1.95
2.04
1.01
-0.21
0.25
-0.46
-0.80
-0.36
-0.90
-1.52
-1.30
-2.87
-2.00
-3.54
-3.07
-0.75
0.12
0.14
0.12
0.03
5.41 14.88 16.07 12.56
Poland
-9.00
-6.04
-3.15
-2.83
Russia
12.64 18.01 11.08
8.44
12.27 12.58 16.42 16.39 12.41 15.94 11.69

-2.54
11.91 12.77 14.17 13.62
13.62 13.72 13.97
-2.40
-3.83
-6.20
-6.56
-3.93
-5.11
-4.87
-3.53
-3.18
-2.44
-2.72
-2.72
8.21 10.07 11.09
9.54
5.96
6.10
4.02
4.61
5.33
4.04
1.68
0.79
0.36
-0.49
-2.22
-5.26
South Africa
-0.51
-0.14
0.29
0.79
-1.04
-3.07
-3.45
-5.26
-6.98
-7.23
-3.96
-2.78
-3.41
-6.32
-5.74
-3.31
-1.73
Spain
-2.92
-3.96
-3.95
-3.27
-3.51
-5.25
-7.34
-8.95
-10.0
-9.63
-4.84
-4.50
-3.76
-1.08
1.18
2.13
2.87
3.66
4.11
4.15
5.02
4.69
6.94
6.63
6.76
8.36
9.25
9.05
6.69
6.85
7.03
6.90
6.56
5.97
5.99
6.05
10.63 11.76
7.96
8.56
12.91 12.98 13.64 14.36
8.64
2.12 10.54
Sweden
Switzerland
Turkey
UK
-0.20
-4.00
2.24
-0.38
-2.59
-3.57
-4.70
-6.09
-5.36
-6.68
-2.05
14.31 14.22 14.03 13.80

-6.47
-11.2
-6.80
-7.46
12.73 11.70 10.69

-8.24
-8.53
-6.29
-2.67
-2.87
-2.34
-2.10
-1.71
-2.14
-2.05
-2.93
-2.28
-1.00
-1.27
-2.69
-1.46
-3.79
-3.09
-2.29
-1.39
-0.51
3.69
7.48
5.77
10.65
2.94
-1.50
-3.69
-7.09
-1.48
-2.21
-6.20
-8.09
-2.78
0.07
-2.09
-2.97
Argentina
-4.21
-3.15
-1.41
8.30
6.36
2.11
2.91
3.66
2.83
2.08
3.64
0.37
-0.54
0.02
-0.96
-1.69
-2.48
-3.05
Brazil
-4.73
-3.77
-4.23
-1.55
0.75
1.75
1.58
1.25
0.11
-1.75
-1.47
-2.20
-2.16
-2.45
-3.70
-3.70
-3.93
-4.09
Ukraine
AMERICAS
Canada
0.12
2.51
2.14
1.67
1.15
2.28
1.85
1.37
0.78
0.12
-2.92
-3.51
-2.75
-3.42
Chile
-0.10
-1.15
-1.54
-0.83
-1.09
2.61
1.54
4.60
4.09
-3.23
2.04
1.48
-1.31
-3.54
-4.52
-5.26
-5.04
-4.51
Colombia
0.37
0.80
-1.10
-1.32
-1.05
-0.78
-1.29
-1.83
-2.87
-2.74
-2.11
-3.07
-2.87
-3.22
-3.75
-3.85
-3.95
-3.90
Mexico
-2.89
-2.71
-2.42
-1.96
-1.13
-0.88
-0.99
-0.77
-1.37
-1.78
-0.86
-0.31
-1.02
-1.27
-1.53
-1.68
-1.79
-1.97
Peru
-2.85
-2.90
-2.23
-1.93
-1.51
0.09
1.46
3.16
1.42
-4.17
-0.57
-2.46
-1.89
-3.58
-4.70
-4.94
-4.67
-4.39
Venezuela
3.40
10.11
1.61
8.17
14.12
13.74 17.63 14.42
6.94
10.19
0.69
3.68
7.72
2.89
1.11
-1.38
-4.60
-9.24
ASIA
Australia
China
Hong Kong
India
Indonesia
South Korea
-5.24
-3.83
-2.01
-3.65
-5.27
-6.06
-5.72
1.90
1.70
1.30
2.40
2.80
3.55
5.90
-4.46
-4.25
-2.99
-2.29
-3.70
-2.36
-3.06
-4.65
-4.71
9.10
5.20
4.00
1.90
2.30
2.40
2.40
2.50
2.70
6.30
4.10
5.90
7.60
10.40
9.50
6.60
4.80
2.30
2.70
2.80
3.20
4.30
-1.00
0.30
1.40
1.50
0.10
-1.30
-1.00
-0.70
-2.50
-2.20
-3.30
-3.40
-5.10
-3.80
-2.90
-3.30
-3.10
4.10
4.90
4.30
4.00
3.40
0.60
0.30
3.00
2.40
0.00
2.00
0.70
0.20
-2.80
-3.70
-2.90
0.00
1.20
2.00
4.10
2.10
1.50
0.60
-0.70
3.90
2.90
1.30
6.15
2.70
1.90
1.00
15.90
9.40
8.30
8.50
New Zealand
-6.05
-4.60
-2.26
-3.62
Philippines
-3.79
-2.97
-2.45
-0.36
Singapore
17.10 11.60 14.20 12.70
Thailand
-6.16
8.60 11.00
-0.70
Malaysia
Taiwan
-5.32
9.50 11.40 12.10 12.30 13.60
2.30
3.80
5.00
3.50
2.30
12.90 12.57 15.20 16.30 15.70 17.50 16.50
11.50 11.40
6.10
2.00
3.00
5.50
7.70
-3.85
-5.71
-7.88
-8.28
-8.10
-8.73
-2.47
-3.17
-4.06
-5.01
-4.80
-6.28
-6.25
-5.62
0.36
1.88
2.00
4.55
4.92
2.20
5.80
4.50
3.20
2.80
3.70
4.30
4.30
4.70
23.30 17.00 19.00 21.80 27.20 14.00 16.30
24.50 25.10 18.60 17.20
2.91
2.90
6.40
9.10
10.20
5.74
4.60
7.20
8.60
6.80 11.40
9.30
9.00 10.50 10.70
10.20
7.50
5.40
5.50
5.60
4.25
-4.30
1.10
5.90
0.80
3.10
1.70
8.30
0.00
-2.10
17.90 18.30 20.30

10.50 10.50 11.50
0.80
2.80
3.20
58
October 10, 2013
Broad Balance of Payments (% of GDP)

99
00
01
02
03
04
05
06
07
08
09
10
11
12
Latest [4qtr
Latest date
ma]
G3
USA
-1.08
0.08
-0.78
-1.76
-3.81
-4.03
-2.53
-3.90
-4.15
-3.44
-5.43
-1.63
-4.16
-2.79
-3.98
Euro area
-2.90
-3.20
-0.90
2.82
0.87
0.33
-1.07
0.16
0.48
-1.29
1.87
0.37
1.58
1.57
2.72
Jun-13
1.76
1.28
0.22
-0.38
0.34
3.66
2.48
5.55
5.30
-4.56
-2.68
-0.08
2.92
-1.69
3.86
Jun-13
Japan
Jun-13
EMEA
Czech Republic
5.44
0.85
4.85
3.12
-5.40
0.16
5.41
-0.15
-0.92
-1.13
2.87
2.54
-0.81
3.39
3.41
Jun-13
France
-2.88
-5.90
0.66
0.47
0.50
-3.83
-2.73
-8.27
-10.03
-3.69
8.35
3.52
8.92
-0.75
-1.45
Jun-13
Germany
-4.40
-2.37
1.14
6.79
5.44
3.80
2.20
2.95
7.55
4.47
1.36
-1.51
6.07
2.14
-0.64
Jun-13
Hungary
2.70
-4.91
3.37
-0.32
-3.87
1.07
1.46
0.81
-8.66
-7.31
-4.36
0.77
7.53
4.91
8.24
Jun-13
Israel
3.07
4.12
0.02
5.66
5.10
2.76
2.49
3.00
Mar-13
Italy
0.21
-1.19
0.70
2.41
0.64
2.30
-0.02
1.07
-3.40
-1.46
-0.21
-2.20
-6.12
0.63
4.73
Jun-13
Norway
4.43
3.96
0.33
-2.42
8.48
0.59
6.83
-9.61
6.78
-11.95
10.84
7.27
3.35
2.15
-2.22
Jun-13
Poland
1.34
0.54
0.16
0.58
3.13
3.95
-1.52
-3.41
-5.23
1.28
1.74
0.56
1.52
0.62
Jun-13
Russia
13.03
13.92
11.03
9.35
6.72
10.42
9.34
11.70
8.08
5.34
3.38
3.71
3.80
4.48
2.05
Jun-13
South Africa
24.99
-4.27
7.39
6.45
1.47
7.35
13.44
15.18
12.60
-13.01
20.50
12.47
-1.15
0.88
-5.72
Jun-13
Spain
-7.42
-7.44
-7.51
-1.66
-7.22
1.52
-2.40
5.35
-5.18
-9.52
-0.74
-1.63
-7.15
-4.22
-1.45
Jun-13
5.24
-4.68
-0.14
0.34
-1.07
-2.74
2.37
3.53
10.49
4.01
17.98
6.23
7.82
5.99
5.77
Jun-13
-12.21
-2.76
-11.23
0.01
2.81
-4.47
-12.25
-4.11
0.19
-10.44
5.26
11.56
1.59
8.86
3.48
Jun-13
1.06
-3.31
1.05
-0.12
-1.27
-1.07
0.20
-0.98
-2.62
-3.82
-0.78
-2.98
-5.08
0.19
0.19
Jun-13
-1.14
0.33
-7.28
0.77
4.52
-3.45
6.60
4.33
1.24
12.80
3.53
-1.03
-5.48
-17.35
-8.24
Jun-13
3.43
5.08
6.74
16.47
14.84
7.15
6.80
-2.28
1.16
5.17
-1.02
-1.71
0.52
Jun-13
Argentina
1.26
-0.71
-4.19
6.55
0.97
-0.77
4.83
8.67
7.19
1.87
3.20
5.24
0.55
1.64
0.40
Jun-13
Brazil
0.91
2.05
0.28
0.26
3.48
2.30
3.54
1.23
5.64
-0.15
3.77
2.45
2.04
1.00
0.77
Jun-13
-0.52
1.10
1.14
0.32
-0.57
0.33
-1.20
-0.75
-0.68
1.61
2.39
2.05
1.19
-1.46
-1.64
Jun-13
-1.06
0.81
-0.19
7.20
9.17
-2.49
5.93
1.71
-6.92
-5.71
1.18
Jun-13
Colombia
3.19
2.87
4.03
-2.73
-0.03
1.46
1.69
2.56
2.61
1.15
3.08
-0.93
0.88
1.29
1.70
Jun-13
Mexico
1.79
0.19
1.75
1.14
1.88
2.19
-0.40
0.56
0.73
2.21
-1.76
3.41
3.87
4.31
4.93
Jun-13
-0.11
-0.03
-0.06
-0.33
-0.13
4.03
0.37
0.06
0.60
-0.13
-0.39
-0.32
0.81
Sep-11
0.20
0.01
0.23
-0.03
0.00
-0.01
0.01
-0.05
0.04
0.01
0.24
0.04
0.03
0.04
-0.02
Jun-13
-1.25
0.22
-0.97
-1.77
0.43
1.41
-0.18
2.24
-5.42
-0.47
4.72
3.50
3.33
-0.15
1.86
Jun-13
4.34
4.52
2.67
4.95
6.35
7.73
9.70
9.77
14.64
12.64
7.21
7.59
5.32
5.27
5.15
Jun-13
28.29
18.89
-11.73
-21.27
-6.64
-21.74
-1.31
-2.23
9.78
2.84
-10.52
-24.79
5.23
-2.02
-20.35
Jun-13
Sweden
Switzerland
Turkey
UK
Ukraine
AMERICAS
Canada
Chile
Peru
Venezuela
ASIA
Australia
China
Hong Kong
India
1.78
2.45
3.46
2.06
0.84
0.70
3.07
-1.85
0.92
-0.28
-2.20
-2.72
-2.36
Jun-13
Indonesia
1.37
0.96
2.32
4.72
4.19
1.74
3.41
4.75
4.24
1.04
4.34
4.15
2.01
-0.14
-0.54
Jun-13
South Korea
Jun-13
8.49
5.96
3.26
1.26
5.01
5.88
1.78
-1.76
-2.12
-1.70
8.03
4.89
2.04
3.06
2.65
Malaysia
12.55
18.24
16.74
2.89
12.15
15.26
13.48
9.99
6.56
Jun-13
New Zealand
0.49
0.38
1.72
3.15
-5.22
-3.65
-2.28
-9.85
-1.37
-0.62
-0.63
-0.56
-5.44
Jun-13
Philippines
1.87
-0.82
-0.51
2.39
1.23
0.02
6.91
9.15
7.40
0.74
6.13
6.99
5.81
4.41
4.37
Dec-12
Singapore
10.20
-2.12
-16.51
5.03
16.60
13.27
25.89
26.08
5.05
24.01
-3.90
22.15
30.94
12.96
11.96
Jun-13
5.31
2.12
5.67
4.43
6.05
2.61
2.83
1.96
-2.10
2.59
7.80
2.35
-1.97
-0.42
-0.26
Jun-13
10.55
7.88
4.84
4.14
3.72
2.25
-2.91
0.93
6.64
1.34
8.56
3.37
1.63
-0.07
-0.14
Jun-13
Taiwan
Thailand
59
October 10, 2013
Foreign Exchange Reserves (US$bn)

Pd end; US$bn
1998
1999
2000
2001
2002
2003
2004
2007
2008
2009
2010
2011
2012
Latest
2005
2006
36.0 32.2 31.2 29.0 33.8 39.7 42.7 37.8

- 228.0 218.6 207.8 215.8 188.2 181.2 167.2
40.9
45.8
49.6
50.5
52.1
51.9
49.9
47.5 Aug-13
184.0
203.2
202.0
194.4
207.1
208.1
220.0
218.6 Aug-13
203.2 277.7 347.2 387.7 451.5 652.8 824.3 828.8
874.9
948.4 1003.7
997.0 1036.3 1221.3 1193.6
1186.3 Aug-13
G3
US
Euro area
Japan
EMEA
Czech Republic
12.5
Euro area
Hungary
12.8
13.0
14.2
29.1
31.1
34.4
36.5
39.7
40.3
37.9
42.4
42.5 Aug-13
- 228.0 218.6 207.8 215.8 188.2 181.2 167.2
23.3
26.3
27.8
184.0
203.2
202.0
194.4
207.1
208.1
220.0
218.6 Aug-13
9.2
10.7
10.9
10.3
9.7
12.0
15.3
18.3
21.3
23.8
33.6
42.5
43.6
47.7
44.0
40.2 Aug-13
Israel
22.7
22.5
23.2
23.2
23.7
25.8
26.6
27.8
29.0
28.4
42.3
59.1
69.3
73.1
74.0
76.7 Aug-13
Norway
17.4
22.5
26.7
22.2
30.7
35.9
43.1
46.4
56.2
60.3
50.2
45.7
49.7
45.6
48.0
Poland
27.2
26.1
26.3
25.2
28.0
31.7
34.6
40.5
46.1
62.7
58.9
73.4
86.3
89.7
100.3
101.9 Aug-13
Russia
7.8
4.2
8.5
6.1
24.3
5.8
32.5
44.1
73.2 120.8 175.7
295.3
466.4
410.7
405.8
432.9
441.2
473.1
451.2 Aug-13
5.8
5.6
6.2
12.8
18.3
22.7
29.2
30.2
32.4
35.4
39.8
41.2
39.5 Aug-13
12.4
13.5
13.8
12.7
15.5
18.0
20.6
21.4
24.1
26.4
25.1
38.5
37.9
38.9
40.3
56.2 Aug-13
South Africa
Sweden
54.6
465.4
Jul-13
Switzerland
38.3
34.2
30.9
30.1
38.2
45.6
53.6
35.4
37.4
43.9
44.2
91.6
217.3
271.1
467.9
Turkey
19.4
23.2
22.3
18.7
26.9
33.8
35.5
50.4
60.7
73.2
70.2
69.2
79.0
76.7
98.3
107.0 Aug-13
Jul-13
UK
27.4
27.5
34.2
28.8
31.0
28.6
34.1
35.9
38.9
47.5
41.6
38.0
49.3
56.2
64.9
68.1 Aug-13
AMERICAS
Argentina
24.5
26.1
24.4
14.5
10.4
13.1
18.0
22.7
30.4
44.2
44.4
42.9
46.6
40.1
36.8
30.7 Aug-13
Brazil
42.6
35.3
32.4
35.6
37.2
48.8
52.5
53.2
85.1
179.4
192.8
231.9
280.6
343.4
362.1
356.9 Aug-13
Canada
19.9
24.4
29.0
30.5
32.7
31.5
30.2
30.7
33.2
39.3
41.5
42.6
44.9
52.8
55.2
56.6 Aug-13
Chile
15.3
14.2
14.7
14.0
14.8
15.2
15.5
16.7
19.2
16.7
22.8
23.8
26.3
40.1
39.7
38.3
7.9
1.6
7.5
8.4
9.7
10.2
10.2
12.8
14.2
14.7
20.1
22.8
23.2
26.3
29.9
34.9
39.6 Aug-13
1.6
0.9
0.8
0.7
0.8
1.0
1.7
1.5
2.8
3.7
2.8
1.4
1.6
1.0
3.3 Aug-13
31.0
8.7
35.1
8.4
44.4
8.7
49.9
9.3
57.7
62.8
73.0
75.4
86.3
94.0
94.1
114.9
137.5
153.5
161.1 Aug-13
Peru
31.5
9.6
33.8
26.9
45.8
30.3
49.6
65.2
29.0
16.7
40.9
61.2
31.2
13.6
37.8
46.1
32.2
12.2
42.7
41.7
36.0
9.8
39.7
31.0
US
50.5
52.1
51.9
49.9
47.5 Aug-13
Venezuela
11.6
11.7
12.6
8.8
8.0
15.5
17.9
23.5
28.9
23.7
32.6
17.7
9.2
6.0
6.0
13.4
19.5
16.8
16.4
18.6
30.0
33.9
41.0
52.8
24.2
29.9
33.0
32.8
36.0
37.8
39.5 Aug-13
145.0 154.7 165.6 212.2 286.4 403.3 609.9 818.9 1066.3 1528.3 1946.0 2399.2 2847.3 3181.2 3311.6
89.6 96.2 107.5 111.2 111.9 118.4 123.5 124.2 133.2 152.6 182.5 255.8 268.6 285.3 317.2
3496.7 Jun-13
Colombia
Ecuador
Mexico
2.5
Jul-13
Jul-13
Jul-13
ASIA
Australia
China
Hong Kong
India
27.0
32.0
37.3
45.3
67.0
97.6 125.2 131.0
Indonesia
22.4
26.2
28.3
27.0
30.8
34.7
Japan
34.7
32.9
203.2 277.7 347.2 387.7 451.5 652.8 824.3 828.8
South Korea
52.0
73.7
95.9 102.5 120.8 154.5 198.2 210.0
Malaysia
24.7
29.7
27.4
28.6
32.4
42.8
64.9
69.4
299.7
Jul-13
250.3
Jul-13
170.2
266.6
246.6
258.6
267.8
262.9
261.7
40.9
54.7
49.3
60.6
90.0
103.6
105.9
98.4 Feb-13
1186.3 Aug-13
874.9
948.4 1003.7
997.0 1036.3 1221.3 1193.6
238.4
261.8
200.5
265.2
286.9
298.2
316.9
318.9
81.7
100.6
90.6
92.9
102.3
129.0
134.9
130.5 Aug-13
Jul-13
New Zealand
3.8
4.0
3.6
3.2
4.5
5.4
6.4
8.7
13.9
17.1
10.9
14.0
15.1
15.2
15.8
13.3
Jul-13
Philippines
9.2
13.1
13.0
13.4
13.2
13.5
13.0
15.8
19.9
30.1
33.0
37.5
54.0
65.7
71.7
73.1
Jul-13
Singapore
74.6
76.5
79.5
74.9
81.4
95.3 111.6 115.5
135.6
162.3
173.4
185.8
223.7
235.4
256.8
258.6
Jul-13
Taiwan
90.3 106.2 106.7 122.2 161.7 206.6 241.7 253.3
266.1
270.3
291.7
348.2
382.0
385.5
403.2
412.6 Sep-13
Thailand
28.4
65.1
85.1
108.3
133.6
165.7
165.2
171.1
159.7 Aug-13
33.8
31.9
32.4
38.0
41.0
48.5
50.5
60
October 10, 2013
Government Debt as % of GDP

99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
60.5
54.5
54.4
56.8
60.2
67.5
67.1
65.8
66.3
75.3
88.8
97.9 102.3 106.3 111.2
Euro area
71.7
69.2
68.2
68.0
69.2
69.6
70.3
68.5
66.3
70.1
80.0
85.4
Japan
131.4 139.9 154.8 164.4 168.5 181.0 185.9 185.1 183.0 196.4 209.0 217.0 233.2 238.5 239.4 239.2 239.1 237.6
93.8
92.8
91.2
G3
USA
87.3
90.6
93.4
EMEA
Czech Republic
13.7
15.4
24.9
28.2
29.8
30.1
30.4
28.2
27.9
28.7
34.2
37.4
40.4
43.5
46.2
46.3
46.4
46.5
Germany
61.4
60.2
59.1
60.7
64.3
66.4
68.6
68.0
65.1
66.9
74.5
82.5
80.5
81.9
81.3
79.3
76.8
74.0
Hungary
60.8
56.1
52.7
55.9
58.6
59.5
61.7
65.9
67.0
73.0
79.8
81.1
80.0
78.5
78.0
76.5
75.0
73.5
Italy
113.2 108.5 108.3 105.4 104.1 103.8 105.4 106.2 103.3 106.1 116.5 119.4 120.8 127.0 130.9 131.0 129.8 127.6
Poland
39.6
36.8
37.6
42.2
47.1
45.7
47.1
47.8
45.0
47.1
50.9
54.8
56.2
55.6
57.6
58.0
57.5
56.7
Russia
98.9
62.4
50.1
41.9
32.3
24.6
15.8
8.3
6.6
5.2
7.3
7.8
8.4
8.8
9.8
10.2
9.9
9.3
South Africa
45.5
42.0
41.2
35.4
34.9
34.6
32.8
30.1
27.6
27.5
33.8
37.1
39.5
43.2
45.7
46.8
47.2
44.7
Spain
62.4
59.4
55.6
52.6
48.8
46.3
43.1
39.7
36.2
40.1
53.9
61.5
69.3
84.1
91.1
95.1
96.7
96.8
Sweden
64.3
53.9
54.7
52.5
51.7
50.3
50.4
45.3
40.2
38.8
42.6
39.4
38.4
38.1
36.9
35.8
33.6
30.5
Switzerland
24.9
25.0
24.1
27.4
27.5
27.2
27.2
24.3
22.4
21.4
20.0
19.1
18.1
17.4
16.4
15.1
13.7
12.2
Turkey
69.2
58.0
77.9
74.0
67.7
59.6
52.7
46.5
39.9
40.0
46.1
43.6
38.3
37.9
36.2
34.6
32.5
30.3
UK
41.9
39.0
37.1
37.0
39.0
40.2
41.7
42.8
43.3
56.2
73.9
67.6
86.3
90.7
94.9
98.6 100.8 87.5
Brazil
49.4
48.8
52.6
55.5
57.2
51.7
46.5
44.0
42.8
38.5
42.1
39.1
36.4
35.2
36.0
37.0
37.5
38.0
Chile
35.1
13.8
15.1
15.7
13.0
10.7
7.3
5.3
4.1
5.2
6.2
9.2
10.3
12.1
11.4
10.0
10.2
10.4
Colombia
40.9
45.1
49.5
55.7
53.4
48.2
46.4
43.0
40.0
39.5
41.9
42.9
40.5
38.7
40.1
41.0
42.0
45.0
Mexico
30.1
10.6
11.5
22.1
22.1
20.7
20.2
20.5
20.8
24.4
28.0
27.5
28.2
31.3
30.4
30.7
31.2
31.5
45.9
46.7
47.1
44.3
37.8
33.1
29.8
24.2
27.1
23.7
21.8
20.4
19.7
19.2
18.0
17.2
35.7
31.1
32.8
42.2
52.6
38.7
32.0
23.7
24.1
20.6
28.0
44.4
42.3
43.2
52.4
62.1
67.4
75.8
Australia
42.0
35.4
32.2
29.4
27.7
24.8
22.9
19.0
13.0
13.0
21.6
29.6
29.6
39.8
39.0
39.3
39.7
39.3
Indonesia
75.8
91.8
78.2
73.8
60.3
56.6
47.3
39.0
35.2
33.1
28.4
26.0
24.4
23.0
23.5
23.0
22.0
22.0
Malaysia
56.1
54.0
63.7
63.4
63.0
62.0
57.6
51.2
48.2
49.9
63.9
49.0
49.0
53.0
54.0
54.5
54.0
53.0
New Zealand
35.6
32.9
31.4
29.1
27.6
25.2
22.8
20.8
17.7
16.9
23.4
27.9
36.2
38.2
36.3
37.8
34.6
34.6
Philippines
71.5
81.5
79.9
84.7
94.5
96.3
82.2
73.3
63.1
70.0
65.3
58.5
56.7
52.0
52.5
52.0
51.0
51.0
South Korea
18.6
19.3
19.6
19.5
22.9
26.1
30.6
32.2
29.7
29.0
32.5
31.9
32.6
33.4
33.8
34.0
32.8
32.2
Taiwan
36.2
39.6
46.4
47.1
48.7
49.7
48.7
46.2
43.7
46.3
51.5
50.6
52.7
53.0
52.9
52.0
50.8
49.4
Thailand
54.3
57.8
57.5
54.9
50.6
49.2
47.4
42.0
38.3
37.3
45.2
42.4
43.8
44.0
45.0
45.0
44.0
43.0
Americas
Peru
Venezuela
Asia
61
October 10, 2013
Policy Rate Forecasts

Policy Rates (%, eop)
Spot
2013
Q1
Q2
2014
Q3
Q4
Q1
Q2
Q3
Q4
Change From 1-yr Carry to 1-yr Carry 1-yr Carry 1-yr Carry
Spot to Q4
USD (nominal
to USD
to EUR
to EUR
2014 (%)
%)
(real %) (nominal %) (real %)
G3
USA
0.13
0.14
0.09
0.13
0.13
0.13
0.13
0.13
0.13
0.01
Euro area
0.50
0.75
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.00
-0.13
0.14
0.13
-0.14
Japan
0.05
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.05
-0.40
-0.43
-0.27
-0.56
Czech Republic
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.00
Euro area
0.50
0.75
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.00
-0.33
-0.31
-0.20
-0.45
-0.13
0.14
Hungary
3.60
5.00
4.25
3.60
3.00
3.00
3.00
3.00
3.25
-0.35
2.26
2.88
2.40
2.75
Israel
1.00
1.75
1.25
1.25
1.00
1.25
1.50
1.75
2.00
1.00
0.52
-0.19
0.65
-0.33
Norway
1.50
1.50
1.50
1.50
1.50
1.50
1.75
1.75
2.00
0.50
1.37
0.83
1.50
0.69
Poland
2.50
3.25
2.75
2.50
2.50
2.50
2.50
2.50
2.75
0.25
2.21
2.10
2.34
1.96
Russia
5.50
5.50
5.50
5.50
5.50
5.75
6.00
6.00
6.00
0.50
5.84
1.78
5.98
1.65
South Africa
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
0.00
5.61
1.53
5.75
1.40
Sweden
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.25
1.50
0.50
0.87
1.49
1.00
1.36
Switzerland
0.02
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-0.02
-0.50
0.53
-0.37
0.39
EMEA
Turkey
7.68
5.25
4.50
4.50
4.50
4.75
5.00
5.25
5.50
-2.18
6.91
1.05
7.05
0.93
UK
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.00
0.26
-0.42
0.39
-0.55
AMERICAS
Brazil
9.00
7.25
8.00
9.00
9.75
9.75
9.75
9.75
9.75
0.75
8.52
4.32
8.66
4.20
Canada
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
0.00
0.90
1.08
1.04
0.94
Chile
5.00
5.00
5.00
5.00
4.50
4.50
4.50
4.50
5.00
0.00
4.61
4.07
4.75
3.94
Colombia
3.25
3.25
3.25
3.25
3.25
4.00
4.50
5.00
5.00
1.75
3.33
2.32
3.47
2.19
0.81
Mexico
3.75
4.00
4.00
4.00
4.00
4.00
4.00
4.25
4.75
1.00
2.78
0.94
2.91
Peru
4.25
4.25
4.25
4.25
4.25
4.75
5.00
5.00
5.00
0.75
3.82
3.06
3.96
2.93
USA
0.13
0.14
0.09
0.13
0.13
0.13
0.13
0.13
0.13
0.01
0.13
-0.14
Australia
2.50
3.00
2.75
2.50
2.25
2.25
2.25
2.25
2.50
0.00
2.36
1.91
2.55
1.83
China
6.00
6.00
6.00
6.00
6.00
6.00
6.00
6.00
6.25
0.25
0.70
-0.18
0.83
-0.31
ASIA
India*
7.50
7.50
7.25
7.50
8.00
8.50
8.50
8.50
8.50
1.00
7.76
2.04
7.91
1.91
Indonesia
7.25
5.75
6.00
7.25
7.75
7.75
7.75
7.75
7.75
0.50
9.25
2.70
9.39
2.57
-0.56
Japan
0.05
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.05
-0.40
-0.43
-0.27
South Korea
2.50
2.75
2.50
2.50
2.50
2.50
2.50
2.75
3.00
0.50
1.73
0.98
1.86
0.84
Malaysia
3.00
3.00
3.00
3.00
3.00
3.00
3.25
3.50
3.50
0.50
1.98
1.21
2.12
1.07
New Zealand
2.50
2.50
2.50
2.50
2.50
2.75
3.00
3.00
3.00
0.50
2.76
2.79
2.98
2.73
Philippines
3.50
3.50
3.50
3.50
3.50
3.50
3.75
4.00
4.00
0.50
-0.09
-2.12
0.04
-2.26
Taiwan
1.88
1.90
1.90
1.90
1.90
1.90
1.90
2.00
2.00
0.13
-1.28
-1.33
-1.15
-1.47
Thailand
2.50
2.75
2.50
2.50
2.50
2.50
2.75
3.00
3.00
0.50
2.39
0.44
2.52
0.30
*Fiscal year. Source: Goldman Sachs Global Investment Research.
62
October 10, 2013
Exchange Rate Forecasts

Euro Crosses
3-Month Horizon
Current*
Forward
Forecast
6-Month Horizon
Forward
Forecast
12-Month Horizon
Forward
Long-term Forecasts**
Forecast
2015 (f)
2016 (f)
G3
EUR/$
1.35
1.35
1.38
1.35
1.40
1.35
1.40
1.35
1.25
EUR/JPY
131.7
131.6
135.2
131.5
144.2
131.3
149.8
155
156
EUR/
0.85
0.85
0.82
0.85
0.83
0.85
0.85
0.85
0.85
EUR/NOK
8.11
8.14
7.70
8.16
7.50
8.23
7.30
6.70
6.60
EUR/SEK
8.74
8.76
8.40
8.78
8.30
8.83
8.30
7.80
7.50
EUR/CHF
1.23
1.23
1.25
1.23
1.28
1.23
1.28
1.30
1.30
EUR/CZK
25.6
25.6
25.9
25.6
25.9
25.5
25.5
23.5
22.5
EUR/HUF
296
298
300
300
305
303
310
310
310
EUR/PLN
4.20
4.22
4.25
4.24
4.25
4.29
4.20
3.90
3.85
EUR/RUB
43.7
44.4
43.6
45.1
43.9
46.3
45.1
43.7
40.5
EUR/TRY
2.68
2.73
2.90
2.77
3.08
2.87
3.36
3.38
3.13
EUR/ILS
4.82
4.83
4.97
4.84
4.97
4.85
4.83
4.66
4.31
EUR/ZAR
13.5
13.7
14.1
13.8
14.6
14.2
14.8
14.9
14.4
EUR/UAH
11.1
11.6
12.7
12.2
14.4
13.0
14.4
EMEA
Americas
EUR/ARS
7.87
8.98
8.49
10.01
9.14
12.37
10.30
10.62
11.21
EUR/BRL
2.98
3.05
3.11
3.11
3.22
3.24
3.36
3.58
3.50
EUR/C$
1.41
1.41
1.45
1.41
1.44
1.42
1.40
1.35
1.25
EUR/MXN
17.8
18.0
17.8
18.1
17.9
18.3
17.6
17.0
15.8
EUR/CLP
678
687
718
695
742
710
749
729
688
EUR/PEN
3.77
3.82
3.86
3.86
3.99
3.92
3.99
4.25
4.13
EUR/COP
2558
2579
2691
2600
2800
2646
2870
2835
2688
EUR/VEF
8.50
8.69
12.32
12.32
12.83
14.50
EUR/A$
1.43
1.44
1.53
1.45
1.59
1.47
1.65
1.59
1.49
EUR/CNY
8.30
8.32
8.50
8.33
8.61
8.37
8.61
8.51
8.00
EUR/HKD
10.49
10.49
10.76
10.49
10.92
10.49
10.92
10.53
9.75
Asia
EUR/INR
83.6
85.7
96.6
87.4
100.8
90.2
98.0
93.2
86.3
EUR/KRW
1454
1463
1490
1470
1540
1481
1540
1485
1450
EUR/MYR
4.32
4.34
4.69
4.37
4.62
4.41
4.48
4.05
3.50
EUR/NZD
1.63
1.64
1.79
1.65
1.82
1.68
1.84
1.85
1.84
EUR/SGD
1.69
1.69
1.75
1.69
1.75
1.69
1.72
1.62
1.44
EUR/TWD
39.8
39.6
41.8
39.5
42.4
39.3
42.4
40.5
37.5
EUR/THB
42.5
42.7
45.5
43.0
45.5
43.6
44.8
43.2
38.8
EUR/IDR
15063
15507
16560
15823
16800
16477
16520
14850
13125
EUR/PHP
58.3
58.2
60.0
58.2
59.2
58.3
56.0
54.0
51.3
* Close 09 October 13
**Long-term Forecasts have been discussed in The Global FX Monthly Analyst, December 14, 2012.
63
October 10, 2013
Dollar Crosses
3-Month Horizon
6-Month Horizon
Current*
Forward
Forecast
Forward
EUR/$
1.35
1.35
1.38
$/JPY
97.4
97.3
98.0
/$
1.60
1.59
$/NOK
5.99
6.02
$/SEK
6.47
$/CHF
12-Month Horizon
Forecast
Long-term Forecasts**
Forecast
Forward
2015 (f)
2016 (f)
1.35
1.40
1.35
1.40
1.35
1.25
97.2
103.0
97.0
107.0
115.0
125.0
1.68
1.59
1.69
1.59
1.65
1.59
1.47
5.58
6.03
5.36
6.08
5.21
4.96
5.28
6.48
6.09
6.49
5.93
6.52
5.93
5.78
6.00
0.91
0.91
0.91
0.91
0.91
0.91
0.91
0.96
1.04
$/CZK
18.9
18.9
18.7
18.9
18.5
18.9
18.2
17.4
18.0
$/HUF
219
220
217
221
218
224
221
230
248
$/PLN
3.10
3.12
3.08
3.14
3.04
3.17
3.00
2.89
3.08
$/RUB
32.3
32.8
31.6
33.3
31.4
34.2
32.2
32.4
32.4
$/TRY
1.98
2.02
2.10
2.05
2.20
2.12
2.40
2.50
2.50
$/ILS
3.56
3.57
3.60
3.58
3.55
3.58
3.45
3.45
3.45
$/ZAR
9.96
10.10
10.20
10.23
10.40
10.52
10.60
11.00
11.50
$/UAH
8.18
8.61
9.20
9.00
10.30
9.63
10.30
$/ARS
5.82
6.64
6.15
7.40
6.53
9.14
7.36
7.87
8.97
$/BRL
2.21
2.25
2.25
2.30
2.30
2.39
2.40
2.65
2.80
$/C$
1.04
1.04
1.05
1.04
1.03
1.05
1.00
1.00
1.00
$/MXN
13.2
13.3
12.9
13.4
12.8
13.6
12.6
12.6
12.6
$/CLP
501
508
520
514
530
524
535
540
550
$/PEN
2.79
2.82
2.80
2.85
2.85
2.90
2.85
3.15
3.30
$/COP
1891
1906
1950
1922
2000
1954
2050
2100
2150
$/VEF
6.29
6.30
8.80
8.80
9.50
11.60
A$/$
0.94
0.94
0.90
0.93
0.88
0.92
0.85
0.85
0.84
$/CNY
6.14
6.15
6.16
6.16
6.15
6.19
6.15
6.30
6.40
$/HKD
7.75
7.75
7.80
7.75
7.80
7.75
7.80
7.80
7.80
$/INR
61.8
63.4
70.0
64.6
72.0
66.6
70.0
69.0
69.0
$/KRW
1075
1082
1080
1087
1100
1094
1100
1100
1160
$/MYR
3.19
3.21
3.40
3.23
3.30
3.26
3.20
3.00
2.80
NZ$/$
0.83
0.83
0.77
0.82
0.77
0.81
0.76
0.73
0.68
$/SGD
1.25
1.25
1.27
1.25
1.25
1.25
1.23
1.20
1.15
$/TWD
29.4
29.3
30.3
29.2
30.3
29.0
30.3
30.0
30.0
$/THB
31.4
31.6
33.0
31.8
32.5
32.2
32.0
32.0
31.0
$/IDR
11140
11465
12000
11695
12000
12170
11800
11000
10500
$/PHP
43.1
43.0
43.5
43.0
42.3
43.1
40.0
40.0
41.0
G3
EMEA
Americas
Asia
* Close 09 October 13
**Long-term Forecasts have been discussed in The Global FX Monthly Analyst, December 14, 2012.
64
October 10, 2013
Disclosure Appendix
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Near-term Risks to our Bullish $/JPY View

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October 10, 2013