Foreign Exchange Outlook pdf

Global Economic Research
Index

Market Tone & Fundamental Focus 3
US/Canada 5
Europe 6
Asia/Oceania 8
Developing Asia 10
Developing Americas 11
Global Currency Forecast 13
Foreign Exchange Outlook is available on: www.scotiabank.com and Bloomberg at SCOE
Foreign

Exchange

Outlook

December 20, 2012
Diverging central bank policy, uneven progress towards sovereign debt
sustainability, political change, progress in Europe, growth in Asia,
investors’ global search for yield and a low volatility market environment are
the themes that are likely to drive the currency landscape in 2013.

The North American outlook is complicated by uncertain fiscal drag, which
has proven to be a significant business and market disturbance; however, for
FX markets, aggressive Fed policy combined with building growth momentum
and favourable risk appetite supports the outlook for the CAD.

In Europe, diminished tail risk and shifting market confidence helped to
support EUR in the final few months of the year; however, bouts of
uncertainty will likely continue to weigh on the currency in 2013; GBP’s

outlook is more positive, but it is the Scandies whose outlook shines, as
they benefit from relative central bank policy and sentiment.

In Asia, the outlook for JPY has deteriorated materially as political
uncertainty and rising concerns that the BoJ is in the midst of losing its
independence weigh on what was already a difficult currency outlook. CNY
continues to appreciate; however, with a narrowed current account surplus
and slower pace of FX reserve accumulation we expect only moderate
strength in 2013.


Happy Holidays!

Best wishes for the holiday season from all of us.

The next issue of Foreign Exchange Outlook will be on Thursday, January 31, 2013.

Global Economic Research
2

Foreign Exchange
Outlook


December 20, 2012
A
ctual Q2a 12 Q3a 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14
1.32 1.27 1.29 1.33 1.30 1.29 1.28 1.27 1.26
1.29 1.28 1.27 1.26 1.26 1.26
84.4 80 78 84 85 87 89 90 90

82 82 82 83 83 84
1.63 1.57 1.62 1.63 1.62 1.63 1.64 1.64 1.65
1.60 1.59 1.59 1.58 1.58 1.58
0.99 1.02 0.98 0.97 0.97 0.97 0.96 0.96 0.95
0.99 0.99 0.99 0.99 0.99 0.99
1.05 1.02 1.04 1.05 1.05 1.06 1.07 1.08 1.08
1.04 1.02 1.02 1.01 1.00 0.99
12.78 13.36 12.86 12.78 12.93 12.84 12.95 13.17 13.22
12.79 12.78 12.72 12.65 12.58 12.62
(
*
)
Source:
Consensus Economics Inc. December 2012
AUDUSD
USDMXN
AUDUSD USDMXN
EURUSD USDJPY
GBPUSD USDCAD
USDJPY
Spot Price vs. 100 Day Moving Average vs. 200 Day Moving Average - (5yr Trend)
Consensus*
Mexican Peso
Consensus*
GBPUSD
Consensus*
Consensus*
USDCAD
Consensus*
Canadian Dollar

Australian Dollar
Global Foreign Exchange Outlook
Euro
Yen
Sterling
December 20, 2012
EURUSD
Consensus*
74
81
88
95
102
109
116
123
USD/ JP Y 100 Day
200 Day
1.12
1.22
1.32
1.42
1.52
1.62
EUR/USD
100 Day
200 Day
1.36
1.51
1.66

1.81
1.96
2.11
GBP / USD
100 Day
200 Day
0.90
0.98
1.06
1.14
1.22
1.30
USD/ CAD
100 Day
200 Day
0.59
0.67
0.74
0.82
0.89
0.97
1.04
1.12
AUD/ USD
100 Da y
200 Da y
9.7
10.8
11.9
13.0

14.1
15.2
USD/ MXN
100 Day
200 Day

Global Economic Research
3

Foreign Exchange
Outlook


December 20, 2012
Diverging central bank policy, uneven progress towards
sovereign debt sustainability, political change, progress in
Europe, growth in Asia, investors’ global search for yield
and a low volatility market environment are the themes
that are likely to drive the currency landscape in 2013.

We expect diverging central bank policies to be a key FX
market focus in 2013. The US, Japan, Europe and the UK
are all leaning heavily on loose and aggressive monetary
policy to stimulate growth and offset tightening fiscal con-
ditions. These policies are typically currency negative,
with Fed and BoJ policy the most aggressive from a cur-
rency perspective. However, many of the other central
banks (particularly in the advanced economies) are facing
the reality of the risks that high household debt and ele-
vated housing prices pose to financial stability in a low

interest rate environment (Canada, Sweden, Switzerland,
Norway, etc.). Accordingly, even in an environment of sub
-trend economic performance and substantial external
headwinds, these central banks are completing easing
cycles and warning of the risks of higher interest rates.
For currencies, these diverging central bank trends are
impossible to ignore.

For North America, the US focus will be multifaceted, re-
volving around i) USD negative Fed policy, ii) fiscal drag
combined with the lack of a credible long-term fiscal plan
and iii) the improving but still modest growth outlook. Can-
ada’s domestic fundamentals are uneven, and vulnerable
to what is a historically wide Brent–Western Canadian
select oil spread, but the central bank has maintained a
hawkish bias since the fall as household debt poses a risk
to financial stability and global investors as well as FX
reserve managers continue to view Canadian assets as
attractive, helping to drive positive Canadian dollar (CAD)
flows. On the back of these trends, we expect the CAD to
appreciate modestly in 2013. The outlook for the Mexican
peso (MXN) is improving, particularly as the economy
recovers and the central bank maintains more hawkish
policy than the Fed.

In the freely floating Latin American FX universe, the Chil-
ean (CLP) and Columbian (COP) pesos are not expected
to repeat their 8-9% 2012 returns. The outlook for the Pe-
ruvian sol (PEN) is strong and could well outperform in
the Latam FX space. The Brazilian real (BRL), which

proved the worst-performing currency in 2012, is ex-
pected to remain biased for weakness but contained with-
in the relatively stable range that characterized the se-
cond half of 2012.

Europe is likely to be an ongoing theme; however, the
market will not suffer tunnel vision the way it did during
some periods in 2012. The outlook for the monetary union
will be plagued by periodic bouts of uncertainty as political
discussions threaten both the banking union and the ulti-
mate path towards a fiscal union, and this will weigh on
the euro (EUR). Helping to offset this is ECB policy, which
is unlikely to prove as aggressive or currency negative as
Fed policy, and a focus on the material progress Europe
has made over the last year. Accordingly, the EUR is ex-
pected to slowly trend modestly lower, closing 2013 at
lower levels than it traded at in late December. The British
pound (GBP) is a less attractive play in 2013 than it was
in 2012 particularly as the UK’s rating is increasingly at
risk, monetary policy is likely to remain expansionary and
the UK’s economic outlook is weighed down by Europe.
However, we expect modest appreciation year-over-year
as the UK continues to benefit from European diversifica-
tion flows, positive sentiment and a credible and estab-
lished fiscal plan. The outlook for the other European cur-
rencies, particularly the Scandies, is more positive. We
have an appreciating trend built in for the SEK and NOK.

In Asia, newly elected Japanese Prime Minister Abe had
a three-pronged campaign: 1) fiscal stimulus to help lift

the economy, which could ultimately push its fiscal bal-
ance even further into deficit and threaten the country’s
credit rating; 2) implementing a 2% inflation target and
maintaining support for aggressive BoJ policy; and finally
3) a hard line in the China/Japan territorial dispute. To-
gether these policies are likely to prove JPY negative.
Accordingly, we have revisited our 2013 year end
USDJPY forecast and raised it from 87 to 90. In China,
the stabilization of the economy and progress towards a
more freely traded exchange rate is likely to keep the
slow trend of appreciation in place. We hold a 2013 6.10
year-end USDCNY target. Political developments in Ko-
rea combined with the won’s (KRW) relative undervalua-
tion on a real effective exchange rate basis are likely to
lead to an appreciating trend in 2013. For the Australian
dollar, the outlook is positive, but currency gains are likely
to lag the CAD’s. We expect growth in China to increase
to 8% in 2013, which would help support the Australian
economy, this combined with US Fed policy should sup-
port the AUD. However, repeated warnings by the central
bank that mining investment has peaked are difficult to
ignore. Accordingly, we look for modest AUD appreciation
in 2013.

The most important risks to our forecasts include: 1) a
sudden and unexpected spike in inflation; 2) geopolitically
induced higher oil prices; 3) a hard landing in China or 4)
a political impasse in either Europe or the US which
threatens the global economic recovery.
MARKET TONE & FUNDAMENTAL FOCUS

Pablo F.G. Bréard +1 416 862-3876 Camilla Sutton +1 416 866-5470

Global Economic Research
4

Foreign Exchange
Outlook


December 20, 2012
As December draws to a close, CAD is up 3.7% year-to-date, within reach of our December 2011 CAD forecast, which
called for 4.0% appreciation in 2012. Looking out to 2013, we expect further CAD appreciation, with the currency closing
the year at 1.04 (equating to 0.96 in USDCAD). From our perspective, relative monetary policy is the most important
driver. The Bank of Canada (BoC) has maintained a hawkish bias as the risks associated with household debt threaten
financial stability; however, the domestic economic backdrop combined with external risks dampen the need for tighter
policy in Canada. Regardless of whether BoC policy is viewed as hawkish or neutral juxtaposed against Fed policy it
suggests USD weakness and CAD appreciation. On the fiscal front, the International Monetary Fund (IMF) expects Can-
ada to generate a deficit of -3.0% of GDP in 2013, an improvement over the estimated 3.8% in 2012, but still a large im-
balance. The government’s plan, which is viewed credibly by markets, is to move towards a balanced budget by calen-
dar year 2018. This compares favourably with the outlook for the US fiscal deficit, which the IMF estimates at 8.7% of
GDP in 2012, declining to 7.3% of GDP in 2013, with no credible fiscal plan to move the US close to a balance budget.
Accordingly, current fiscal balances combined with their outlook should favour investment in Canada and hence support
CAD. GDP growth is typically a weak driver of FX, accordingly we are not concerned that Canada is expected to lag the
US in both 2013 and 2014, as it did in 2012. Traditionally, CAD has been viewed as a petrol currency; however, this is
an increasingly complex relationship. There are three key components: 1) oil prices, which are expected to remain sup-
portive of the Canadian economic backdrop; 2) the widening of the Brent-WTI spread, which is a weight against the Ca-
nadian economy. Canada exports oil prices below WTI levels (at Canadian Western Select), but still imports a significant
portion of central and eastern Canada oil demands at Brent prices. Accordingly as the spread widens, Canada is export-
ing at far lower prices than it is importing at and creates a net drag to the economy. 3) As US production increases,
some have questioned what the impact on Canadian oil will be. Balancing all these issues, we view oil prices as a neu-

tral driver of CAD in 2013. Summing up, we expect CAD to strengthen year-over-year.
CANADA Camilla Sutton +1 416 866-5470
Eric Theoret +1 416 863-7030
12 m6 m3 m 3 m6 m12 m
AUDCAD 1.04 1.04 1.02 1.02 1.03 1.04 AUDCAD
CADJPY 75.63 78.11 80.10 87.63 89.69 93.75 CADJPY
EURCAD 1.35 1.29 1.27 1.26 1.25 1.22 EURCAD
USDCAD 1.03 1.02 0.98 0.97 0.97 0.96 USDCAD
Currency Trends
Spot
20-Dec
OutlookGoing Back
FX Rate FX Rate
EURCAD USDCAD
1.035
85.41
1.307
0.987
AUDCAD CADJPY
0.99
1.01
1.03
1.05
1.07
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
72.0
75.0
78.0
81.0
84.0

87.0
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
1.21
1.24
1.27
1.30
1.33
1.36
1.39
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
0.96
0.98
1.00
1.02
1.04
1.06
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Global Economic Research
5

Foreign Exchange
Outlook


December 20, 2012
UNITED STATES - US GDP growth is constrained by the
uncertainty surrounding the ‘fiscal cliff’ negotiations in Con-
gress. Business confidence is low and consumer confi-
dence, which had been gaining momentum, has softened

with the University of Michigan Confidence Index moving
down to 74.5 in December from 82.7. The outlook for con-
sumption has improved on gains in the jobs and housing
markets, however, retail sales figures have been patchy
(flat in November excluding autos) and households face
possible tax increases in the New Year hurting disposable
income. The job market has some momentum with non-
farm payrolls adding almost 800,000 jobs in the past five
months, including another 146,000 in November. The un-
employment rate moved down to 7.7%, from a peak of
10%, but this masks the decline in labour force participa-
tion as people become discouraged looking for work. The
housing market also continues to turn around from de-
pressed levels, with housing starts heading towards
900,000 (from a low of 523,000 in 2009), while the Case-
Shiller Home Price Index has shown monthly increases
since March. Meanwhile, business investment remains de-
pressed and contracted by 1.8% annualized in Q3, but
should benefit from eventual clarity of the fiscal issues, re-
inforced by the Fed’s aggressively accommodative mone-
tary policy. Industrial production rebounded in November,
rising by 1.1% m/m, offsetting weakness in October due to
Hurricane Sandy. However, the ISM Manufacturing Index
moved below 50 again, confirming that the outlook for pro-
duction continues to be mixed. Even though the US will
outperform most other advanced economies next year, the
rebound remains weak in comparison to previous post-
recession recoveries. This is largely because of the ongo-
ing fiscal drag, consumer deleveraging, and weak global
demand which limits any major improvements in the net

trade balance, all of which restrain potential US economic
growth.
CANADA - The Canadian economy has lost momentum in
recent quarters. The slow pace of the US and global recov-
ery, the persistent strength in the Canadian dollar and low-
er prices for key domestic resources are weighing on man-
ufacturing output and export earnings. Despite a continued
large surplus in commodities trade, growing deficits in man-
ufactured goods and services have pushed Canada’s cur-
rent account shortfall to around $70 billion, or 4% of GDP.
Business confidence and investment intentions remain rea-
sonably positive, but the volatile and uncertain global eco-
nomic and financial environment is tempering capital
spending, and scaling back some resource expansion
plans. While the pace of job growth so far remains healthy,
concern over high household debt burdens has contributed
to more moderate consumer spending and household bor-
rowing. Home sales have slowed steadily since the spring
as high prices and a tightening in mortgage rules have
eroded affordability, notwithstanding generationally low
borrowing costs. This in turn has begun to moderate the
pace of new homebuilding. Federal and provincial public
sector restraint also is expected to remain a drag on growth
through 2014, though to a smaller degree than in many
other advanced nations. Overall, the Canadian economy is
expected to post moderate growth of 1.7% in 2013, picking
up to 2.3% in 2014 as improving global economic condi-
tions support higher commodity prices, stronger exports
and corporate earnings, and rising business capital invest-
ment. Headline and core inflation rates have moved back

toward the lower end of the Bank of Canada’s 1-3% target
range, with underlying price trends restrained by modest
wage growth, limited retail pricing power and Canadian
dollar strength.
CANADA AND UNITED STATES Adrienne Warren +1 416 866-4315
Fundamental Commentary Devin Kinasz +1 416 866-4214
MONETARY POLICY COMMENTARY Derek Holt +1 416 863-7707
UNITED STATES - We expect the Fed to continue with its
current pace of asset purchases (US$85/bn per month) for
some time yet, although in light of Chairman Bernanke’s
statement that the Fed will adjust the monthly pace of pur-
chases in response to economic data and economic condi-
tions – including fiscal policy developments – it is fairly diffi-
cult to have policy certainty with respect to Fed asset pur-
chases over a medium-term horizon. Similarly, we expect
markets will view the Fed’s interest rate thresholds as con-
sistent with its earlier date-based guidance over the coming
months; however, there is risk that this could erode and
add confusion into markets over time, particularly if the Fed
stops publishing the expected date of policy firming of the
FOMC participants in its projections. We see risk that the
size of the Fed’s monthly purchases could begin to impact
market liquidity if the current pace continues into 2014.
CANADA - We continue to expect the Bank of Canada
(BoC) to remain on hold into 2014 with risks of a longer
pause contingent on the trajectory of the economy and
global monetary policy conditions. We anticipate that the
transition from Governor Carney to a new governor will be
smooth, and that markets will continue to expect interest
rate policy stability during the leadership change. Recent

data have continued to demonstrate that the Bank of Cana-
da is wise to raise the “two-sided” risk emanating from im-
balances in the household sector – with the emphasis on
downside risks. The BoC refers to this as “the biggest do-
mestic risk” which is consistent with our long-held view as
well. This is one factor contributing to our view that the out-
put gap will continue to reflect spare capacity in the Cana-
dian economy through Scotiabank’s forecast horizon.

Global Economic Research
6

Foreign Exchange
Outlook


December 20, 2012
EURO ZONE - Progress on the banking union, the future framework of the European Union, Fed policy and short cover-
ing have helped to support EUR in the final month of the year. However looking out to 2013, there are significant EUR
downside risks that are difficult to ignore; bouts of political uncertainty, economic contraction and negative headlines are
likely to weigh heavily on fragile market sentiment driving a small depreciation in EUR in 2013. We hold a Q1 2013 fore-
cast of 1.30.

UNITED KINGDOM - Sterling is a less attractive play in 2013 than it was in 2012 particularly as the UK’s rating is increas-
ingly at risk, monetary policy is likely to remain expansionary and the UK’s economic outlook is weighed down by Europe.
However, we expect modest appreciation year-over-year as GBP continues to benefit from European diversification flows,
positive sentiment (with the CFTC reporting in mid-December a net long GBP holding of US$2.8 billion) and a credible
and established fiscal plan. We hold a Q1 2013 target of 1.62.

SWITZERLAND - Plagued by weak growth, deflation and economic ties into the euro zone, the Swiss outlook is chal-

lenged. In response, the Swiss National Bank (SNB) remains committed to the EURCHF 1.20 floor, which the market
views as credible. The SNB does not foresee the economy exiting deflation until 2014 and even then inflation remains
subdued at just 0.4%. Accordingly, we expect the floor to remain in place through 2013.

SWEDEN - The outlook for SEK is supported by what we expect is the conclusion of the Riksbank easing cycle, an im-
proving growth profile and the outlook for risk sentiment. However, sentiment is fragile and SEK will be vulnerable during
periods of EUR weakness. EURSEK traded in a broad range during the last quarter of the year, weakening the im-
portance of technical signals. We expect EURSEK to close Q1 2013 at 8.45.
EUROPE Camilla Sutton +1 416 866-5470
Currency Outlook Eric Theoret +1 416 863-7030
12 m6 m3 m 3 m6 m12 m
EURUSD 1.31 1.27 1.30 1.30 1.29 1.27 EURUSD
GBPUSD 1.57 1.57 1.62 1.62 1.63 1.64 GBPUSD
EURCHF 1.22 1.20 1.21 1.20 1.21 1.22 EURCHF
EURSEK 8.98 8.83 8.46 8.60 8.50 8.30 EURSEK
EURUSD GBPUSD
EURCHF EURSEK
1.32
1.63
1.21
8.62
Currency Trends
FX Rate FX Rate
Spot
20-Dec
OutlookGoing Back
1.20
1.25
1.30
1.35

Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
1.53
1.56
1.58
1.61
1.63
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
GBPUSD
1.20
1.21
1.22
1.23
1.24
1.25
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
8.10
8.25
8.40
8.55
8.70
8.85
9.00
9.15
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Global Economic Research
7

Foreign Exchange
Outlook

December 20, 2012
EURO ZONE - Real economic weakness, which was ex-
pected to materialize earlier in the year as suggested by
depressed PMI and sentiment surveys, has taken hold in
the euro area in the final months of 2012. After averaging a
monthly gain of 0.1% m/m from January through August,
industrial production took a sharp turn downward, collapsing
1.9% in September-October. The payback from a resilient
third-quarter GDP performance in the largest economies of
the euro area (driven largely by one-off calendar effects) will
elicit sharp GDP contractions in the final quarter, with nega-
tive carry into the New Year. Nevertheless, there are tenta-
tive signs of a turning point; recent survey data saw im-
provements in the Ifo and ZEW expectation indexes, as well
as the PMIs. We continue to anticipate that a tenuous re-
covery will emerge in mid-2013, though on account of the
worse expected performance in the fourth quarter of 2012,
we have trimmed our GDP expectation for next year to -
0.1% (from 0%). We maintain our 2014 forecast at 1.0%.
Tail risks have been reduced by major central bank policy
and recent Eurogroup agreements on Greece and the bank-
ing union. However, several uncertainties remain, including
elections in Italy and Germany, progress on fiscal consoli-
dation, bank credit conditions, currency dynamics and com-
modity prices. At present we remain of the view that under
this scenario, and with inflation expected to remain con-
sistent with price stability, the European Central Bank will
leave interest rates unchanged through 2014.

UNITED KINGDOM – Despite considerable economic data
volatility in the fourth quarter, the pound sterling continues
to gain. The currency has climbed roughly 2.5% vis-à-vis
the US dollar since mid-November, bringing it to a near-
term high close to 1.63. Recent support has come from US
monetary policy, tentative progress on the euro area bank-
ing union, and a slight hawkish lean by the Bank of England
in the minutes of the latest Monetary Policy Committee
meeting. One factor threatening the sterling’s gradual ap-
preciation trajectory is the recent decision by S&P to return
the nation’s prized “AAA” sovereign credit rating to negative
watch, matching the outlook of the other major rating agen-
cies and suggesting a 1-in-3 chance of a downgrade in the
next two years. S&P cited concerns about the economic
growth outlook and higher than projected borrowing require-
ments (as government deficit targets were recently pushed
back). On the economic front, developments have been
erratic. Likely offsetting a second straight drop in industrial
production in October (which carried over into petroleum-
dependent manufacturing industries, risking a triple-dip re-
cession situation) was a substantial gain in construction
output, which jumped 8.3% m/m in October. Though labour
market conditions remain solid, growth in retail sales has
slowed sharply, averaging 0.8% y/y in October-November,
down from 2.4% in the third quarter. Inflation remained un-
changed at 2.7% y/y in November. Gas price and utility bill
hikes will boost the headline rate in the coming months.
SWITZERLAND - In the context of a relatively sound local
economic environment, rising imbalances in the mortgage
and real estate markets, and remaining external uncertain-

ties linked to the euro crisis and US fiscal situation, the
Swiss National Bank (SNB) will maintain a neutral bias
around its EURCHF 1.20 minimum exchange rate policy
through 2013. At the last policy meeting in mid-December,
the bank recognized that as the announcements of vast
monetary accommodation by major central banks have
helped to calm risk sentiment in global financial markets
since the summer, pressure on the franc has also eased.
Nevertheless, the currency is still considered strong, with
persistent demand for safe Swiss assets bringing the yield
on ten-year bonds down to 0.33% on December 10
th
(a
global record low). An impressive 1.4% y/y output gain in
the third quarter was driven by a temporary revival in ex-
ports, which is expected to be reversed in the final quarter,
limiting the overall advance in 2012 to around 0.8%. Despite
substantial growth in monetary aggregates in recent
months, the bank contends that there is no risk of inflation in
the foreseeable future, given continued spare capacity in
the economy, an expected increase in unemployment and
stable inflationary expectations. The annual pace of defla-
tion reaccelerated in November, from -0.2% y/y in October
to -0.4%. The SNB remains concerned about the effect of
an extended period of low interest rates on the domestic
real estate market and banking sector.
SWEDEN - With the enduring debt crisis in the euro area
weighing more heavily on the Swedish economy, the na-
tion’s monetary authorities have employed further policy
accommodation, lowering the benchmark repo rate to

1.00% at the central bank meeting on December 18
th
. We
anticipate that this latest cut marks the bottom of the current
easing cycle (a cumulative 100 basis points over the last
year), and that the Riksbank will begin to normalize rates by
early 2014. The decision was underpinned by the marked
loss of economic momentum in the second half of the year
– specifically, on the domestic front (external demand has
been lacklustre all year). Real GDP growth slowed from
1.3% y/y to 0.7% in the third quarter, and further slowing is
implied by declines in industrial production and orders and
services production in October. Household and business
confidence is deteriorating, as is the outlook for the labour
market, and the Riksbank considers consumption and in-
vestment to be weak. The bank’s forecast for growth in
2013 was lowered considerably, from 1.8% to 1.2% (the
projection for 2012 was left at 0.9%). Furthermore, the
threat of inflation has emerged in recent months, with the
headline rate falling below zero in November, to -0.1% y/y,
for the first time in three years. The krona has followed a
gradual weakening trend since August, though we expect
the currency to regain strength in 2013 on the back of the
nation’s strong public finances, triple-A credit rating, and
comparatively robust growth profile among EU members.
EUROPE
Fundamental Commentary Sarah Howcroft +1 416 862-3174

Global Economic Research
8

Foreign Exchange
Outlook


December 20, 2012
JAPAN - The outlook for JPY has deteriorated; the newly elected Prime Minister Abe is expected to increase fiscal stimu-
lus at the risk of pressure from rating agencies and global investors, while making aggressive changes at the BoJ, includ-
ing the implementation of a 2% inflation target. Finally, the territorial dispute with China poses economic risks. Sentiment
has turned rapidly against the yen, with the CFTC reporting a record short yen position of US$14 billion. We hold a Q113
USDJPY target of 85.

CHINA - CNY broke away from trading at the upper end of its trading band after onshore authorities finally stepped in to
provide liquidity for what had been an unbalanced market since early November. The stabilization in China’s economy
has engendered CNY buying pressures on rising expectation for modest appreciation. Policymakers appear content to
allow CNY trading to evolve in a more market-determined manner, but still constrained within its daily trading limit. We
expect USDCNY to close Q113 at 6.25.

AUSTRALIA - The Australian economy is supported by tight monetary policy, limited fiscal tightening and stabilization in
the outlook for China. This combined with the FX impact of Fed policy has encouraged bullish investor sentiment. In mid-
December the net long AUD position (as reported by the CFTC) stood at a record high of US$10.9 billion. Meanwhile, the
low market volatility environment is encouraging the return of carry trades. Accordingly, the outlook for AUD is bright, but
dampened by fears over a peak in mining investment. We hold a modest Q113 target of 1.05.

NEW ZEALAND - Investor sentiment is increasingly bullish towards NZD, with the net long position at a record high of
US$2.1 billion. We are concerned that the market has gotten ahead of itself and the rally is too stretched, accordingly,
even though NZD should see modest appreciation in 2013, we expect the first quarter to be disappointing, with NZDUSD
closing at 0.81.
ASIA/OCEANIA Camilla Sutton +1 416 866-5470
Currency Outlook Sacha Tihanyi + 852-2861-4770

12 m6 m3 m 3 m6 m12 m
USDJPY 77.89 79.54 78.24 85.00 87.00 85.00 USDJPY
USDCNY 6.35 6.36 6.30 6.25 6.20 6.10 USDCNY
AUDUSD 1.01 1.02 1.04 1.05 1.06 1.08 AUDUSD
NZDUSD 0.77 0.80 0.83 0.81 0.82 0.83 NZDUSD
84.3
Currency Trends
Spo
t
20-Dec
OutlookGoing Back
FX Rate FX Rate
6.23
USDJPY USDCNY
AUDUSD NZDUSD
1.05
0.83
75.5
77.5
79.5
81.5
83.5
85.5
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
6.20
6.25
6.30
6.35
6.40
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

0.96
1.00
1.03
1.07
1.10
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
0.74
0.77
0.79
0.82
0.84
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Global Economic Research
9

Foreign Exchange
Outlook


December 20, 2012
JAPAN - Japan’s weakening economic fundamentals and
improved Chinese growth prospects are driving a correc-
tion in the Japanese yen’s value, which has been tradition-
ally supported by persistent investor risk aversion and mar-
kets’ flight-to-liquidity dynamics. We expect Japanese real
GDP to grow by 1.7% in 2012, and to record only a modest
average gain of 1% in 2013-14 as the tsunami-related re-
construction boom vanishes. A change in political leader-
ship is taking place. Following general elections held on

December 16
th
the opposition Liberal Democratic Party
(LDP) is returning to office. With its junior partner, the New
Komeito party, the LDP will hold a two-thirds majority that
will allow it to push through legislation relatively easily.
Shinzo Abe, the leader of the LDP and the forthcoming
prime minister, has been a very vocal support of further
monetary and fiscal stimulus, despite the fact that Japan’s
government finances are weak, with the debt-to-GDP ratio
likely to surpass 245% in 2013, and that the central bank’s
independence may be at risk. Policymakers are seeking to
ward off deflation, to encourage a decline in longer-term
interest rates, and to provide a boost to private spending.
Deflationary pressures are persistent, with consumer prices
dropping from year-earlier levels since June 2012 (the
headline inflation rate was -0.4% y/y in October). We antici-
pate that inflation remains dormant in 2013 before picking
up slightly to ½% y/y in 2014.
CHINA - China’s economic outlook continues to improve
with real GDP, sentiment indicators, industrial production,
and retail sales indicating that a revival, albeit modest, is
imminent. We expect China’s output growth to reach 8% in
2013 from 7.7% in 2012, and to accelerate to 8⅓% in
2014. Inflation will likely pick up moderately from the No-
vember level of 2.0% y/y, reaching 3.3% y/y by the end of
2013. Nevertheless, persistent deflationary pressures fur-
ther up the distribution chain (producer prices dropped
2.2% y/y in November) alleviate any near-term concerns
regarding significant upside pressure on prices. Against

this backdrop, we have made a minor revision to our ex-
pectations regarding China’s monetary policy path. We
now assess that the People’s Bank of China’s benchmark 1
-year lending rate has reached its cyclical bottom at the
current level of 6.0%. Monetary tightening will likely com-
mence in the first quarter of 2014, taking the policy rate to
6.6% by the end of that year. China’s new leadership, led
by Xi Jinping (expected to take over the country’s presiden-
cy in March 2013) and Li Keqiang (set to become the
premier), continues to highlight the need for a more bal-
anced approach to economic development that prioritizes
consumption over investment and exports. Such progress
would also improve stability and growth in China and the
Asian region at large. Nevertheless, we expect any ad-
vancement on economic reforms to be gradual in nature.

AUSTRALIA - The Australian dollar continues to be sup-
ported by relatively strong economic fundamentals, a
triple-A sovereign credit rating, still-wide interest rate differ-
entials relative to other advanced economies, and portfolio
investment inflows. While the peak in resource investment
is approaching and monetary easing has taken Australian
interest rates to record lows, an imminent, though gradual,
revival of the Chinese economy together with strengthening
investor sentiment should support the currency through
2013. Inflation will likely continue to climb higher in the near
future from the third quarter level of 2.0% y/y, partly reflect-
ing the introduction of a carbon tax in July 2012; neverthe-
less, we expect the headline rate to remain within the Re-
serve Bank of Australia’s (RBA) target range of 2-3%

through 2014. Following a benchmark interest rate cut to
3.0% in early December, we assess that the current easing
cycle has now reached its bottom, with the RBA likely to
begin to normalize monetary conditions in the final quarter
of 2013. Australia is one of the fastest-growing economies
in the developed world, with the resources sector continu-
ing to be the key economic motor. We estimate that real
GDP will advance by 3½% in 2012, with growth averaging
slightly less than 3% in 2013-14. The output pace slowed
slightly to 0.5% q/q (3.1% y/y) in the third quarter of 2012
from 0.6% q/q (3.8% y/y) in the April-June period, reflecting
slower household expenditure growth and cutbacks in pub-
lic spending.
NEW ZEALAND - Initial signs are emerging that New Zea-
land’s economic momentum will be picking up in the near
term. Improving housing market conditions and recovering
consumer confidence point to forthcoming gains in house-
hold spending. Domestic demand continues to be the main
economic driver, driven by earthquake-related reconstruc-
tion investment; meanwhile, subdued external conditions
will continue to weigh on the overall economic outlook as
the country’s exporters battle with still-weak global demand
and an elevated currency. We expect New Zealand’s real
GDP to expand by around 1⅔% this year, followed by a
modest acceleration to 2⅓% in 2013. The Reserve Bank of
New Zealand will likely maintain an accommodative mone-
tary stance in the coming quarters, keeping the Cash Rate
unchanged at a record low of 2.5% at the next policy meet-
ing on January 30
th

. Following the December 6
th
meeting,
monetary authorities noted the improved global outlook,
and assessed that the excess capacity in the domestic
economy will be eliminated by the end of 2013. An eco-
nomic revival will increase inflationary pressures, taking the
headline rate to the central bank’s 2% target midpoint in
2013 from the third quarter 2012 level of 0.8% y/y. Despite
a large – and widening – current account deficit (averaging
5% of GDP in 2012-13), the New Zealand dollar remains at
a historically high level vis-à-vis the US dollar as the coun-
try continues to offer more attractive rates of return than
most other advanced economies.
ASIA/OCEANIA
Fundamental Commentary Tuuli McCully + 1 416 863-2859

Global Economic Research
10

Foreign Exchange
Outlook


December 20, 2012
INDIA - With the RBI holding policy through December and signaling greater ease with inflation, rate cuts remain on tar-
get for Q1 2013, a factor that has helped interest in both equities and government fixed income. However, INR remains
challenged by a very weak current account position which continues to leave it at the whim of portfolio flows. This makes
the positive sentiment that should follow the resumption of an easing cycle fairly beneficial for the rupee. We target
52.25 by the end of next year.

KOREA - KRW continues to make new highs as official resistance to won appreciation has only managed to slow the
pace of gain. QE-related market forces have been significant drivers of portfolio flows into Korea, as the rolling monthly
inflows to equities have reached six month highs while the current account has rebounded to exert further pressure. The
new government promises to bring a more tolerant view of KRW appreciation, a feature that helps to underpin our bull-
ish outlook. We forecast USDKRW at 1050 by Q4 2013.

TAIWAN - TWD continued to see appreciation, though in a very moderate fashion as volatility in USDTWD fell to a multi
-year lows in December. The recent stable, strong CNY fixing levels have helped make TWD gains more palatable to
the onshore authorities, and while Taiwan’s economy has failed to achieve escape velocity, export indications are im-
proving in line with production, justifying a somewhat stronger TWD. We doubt however that TWD can be any kind of
outperformer over the next year, and target 28.75 by Q4 2013.

HONG KONG - HKD has traded at the strong-side convertibility undertaking of the HKMA for the most sustained period
of time since 2009, reflecting strong QE-driven capital inflows; the Hang Seng Index has been the top regional performer
since the announcement of QE3. Not only can the HKMA indefinitely maintain the current required interventions to de-
fend the strong side of the band, we see no risk that the peg is dropped in the foreseeable future. We target USDHKD at
7.75 through 2013.
DEVELOPING ASIA
Currency Outlook Sacha Tihanyi + 852-2861-4770
12 m6 m3 m 3 m6 m12 m
USDINR 52.89 56.15 54.39 54.13 53.75 53.00 USDINR
USDKRW 1162 1151 1123 1069 1063 1050 USDKRW
USDTW D 30.34 29.86 29.38 29.01 28.93 28.75 USDTWD
USDHKD 7.78 7.76 7.75 7.75 7.75 7.75 USDHKD
1075
USDINR USDKRW
USDTWD USDHKD
29.06
7.75

54.85
Currency Trends
Spo
t
20-Dec
OutlookGoin
g
Back
FX Rate FX Rate
48.00
50.00
52.00
54.00
56.00
58.00
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
1065
1095
1125
1155
1185
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
28.70
29.05
29.40
29.75
30.10
30.45
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
7.74

7.75
7.76
7.77
7.78
7.79
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
For Fundamental Commentary on developing Asian economies, please refer to our Foreign Exchange Outlook,
December 2012, at www.scotiabank.com.

Global Economic Research
11

Foreign Exchange
Outlook


December 20, 2012
BRAZIL - We interpreted the government’s recent unwinding of capital controls, the re-introduction of BRL supportive
swaps by the central bank, and continued statements from the government that they will continue to push for lower rates
in the country as a signal that if it were necessary to choose between FX and rates to tighten domestic monetary condi-
tions, FX would be the chosen tool. This suggests some potential appetite for moderate BRL appreciation if the economy
rebounds. However, in the near term, we still see USDBRL range trading as the government continues to walk the tight-
rope, balancing between containing inflationary pressures and attempting to boost the economy.

MEXICO - The latest IMM data shows MXN net-longs have risen to a new all-time high (US$5.86 billion), highlighting
broad based optimism over the Mexican economy (which we think is consistent with recent signs of potential progress on
the structural reform front). However, it also suggests near term risks for the peso if an unexpected shock triggers a bout
of risk aversion. These concerns were mentioned in Banxico’s latest MPC meeting minutes as one of the potential risks
that could complicate the disinflation process, as a weaker MXN could derail inflation’s declining trend .

CHILE - The statement from the latest policy meeting suggests that while the central bank sees risks to inflation and
growth as fairly balanced, the policy bias appears skewed towards tightening as, among other things, outperforming do-
mestic demand is contributing to the deterioration of the trade and current account balances. Despite a bias for higher
rates, we see the deteriorating trade dynamics, combined with less favourable terms of trade as a CLP headwind heading
into 2013, which could lead the USDCLP cross to rise moderately towards 497 by the end of 2013.

COLOMBIA - Although the planned cuts to taxes on foreign investment in domestic bonds are expected to be a COP tail-
wind by boosting foreign interest in domestic fixed income, Congress is simultaneously debating introducing a 5% tax on
stock dividends exceeding US$111,222, which were previously untaxed, and could partly offset potential fixed income
inflows. With seasonal corporate outflows fading, and the central bank’s relatively dovish bias shift now priced in, we look
for USDCOP to continue to hover around 1800 heading into year-end.
DEVELOPING AMERICAS
Currency Outlook Eduardo Suárez +1 416 945-4538
12 m 6 m 3 m 3 m 6 m 12 m
USDBRL 1.85 2.03 2.02 2.11 2.12 2.15 USDBRL
USDMXN 13.78 13.71 12.86 12.93 12.84 13.17 USDMXN
USDCLP 519 495 470 493 494 497 USDCLP
USDCOP 1934 1770 1794 1810 1820 1850 USDCOP
Currency Trends
Spot
20-Dec
OutlookGoing Back
FX Rate FX Rate
2.06
USDCLP USDCOP
12.78
475
1789
USDBRL USDMXN
1.67

1.75
1.82
1.90
1.97
2.05
2.12
2.20
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
12.1
12.6
13.1
13.6
14.1
14.6
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
465
480
495
510
525
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
1745
1795
1845
1895
1945
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Global Economic Research
12

Foreign Exchange
Outlook


December 20, 2012
BRAZIL - The gradual local economic recovery, the re-
bound in annual inflation and the central bank’s interven-
tion in the currency market (in both directions) continue to
be the main drivers for the Brazilian real’s (BRL) perfor-
mance. The currency has lost more than 10% in the last 12
months and currently ranks as the second worst performer
(followed by the Argentinian peso) vis-à-vis the US dollar in
the emerging-market universe. In October, industrial output
expanded by 2.3% y/y, the first annual gain since Septem-
ber 2009, which signals a smooth recovery in the sector,
mainly driven by significant government stimulus packages
and a relatively weaker currency. Still, the manufacturing
sector’s recovery will have to be confirmed in the coming
months. The most recent central bank survey shows a sig-
nificant adjustment to 1% (from 1.5% a month ago) in 2012
GDP growth expectations after the disappointing third-
quarter data. We are currently expecting an expansion rate
of 1.9% y/y in the fourth quarter, with a significant risk to
the downside. On the inflation front, the CPI has accelerat-
ed from 4.9% y/y in June to 5.5% in November, and it is
highly probable that it will move higher in the coming
months. Nonetheless, we do not anticipate that the central
bank will modify its reference rate anytime soon, but will
instead show more tolerance to rising inflation. President

Dilma Rousseff’s administration has urged for low interest
rates to boost the economic recovery and will probably an-
nounce additional stimulus measures in the near future.
MEXICO - The Mexican peso (MXN) remains in a strength-
ening phase, gaining around 2.0% vis-à-vis the USD over
the last month and a solid 9% in the last 12 months. The
MXN now ranks as the second best performer (following the
Chilean peso) in Latin America and the fourth best in the
emerging market universe, recovering almost all of its 2011
losses. The currency has been subject to improved interna-
tional sentiment, the Federal Reserve’s expansionary mon-
etary policy and the optimism generated by local structural
reforms and a solid economic performance. However, the
US fiscal situation, the European sovereign debt crisis and
any swings in international risk appetite will affect the cur-
rency in the short-term. Inflation continues to weigh on the
country’s outlook; even though the headline rate decelerat-
ed from 4.6% y/y in October to 4.2% in November, driven
particularly by discounts offered in the “buen fin”, it remains
slightly above the central bank’s tolerance range. Economic
activity remains solid; however, signs of a moderation in
domestic demand have emerged, in line with our base case
scenario. We estimate that the Mexican economy will ex-
pand by 3.4% y/y in the last quarter of the year, bringing the
2012 overall rate to 4.0%. The new President took office on
December 1st, and significant agreements with the other
two major parties have been reached, setting a positive
tone for the coming years in terms of structural reforms.
CHILE - The Chilean peso (CLP) ranks as the best currency
performer among its Latin American peers in 2012, gaining

9.5% against the US dollar. The CLP has been influenced
by high liquidity in international markets seeking yields in
the context of a solid local economic performance. Domes-
tic demand has offset the negative impact coming from
weaker external demand; however, the currency is not im-
mune to swings in international sentiment as a result of US
fiscal concerns and European debt problems. In the most
recent monetary report, the central bank raised its projected
2013 GDP growth range by 25 basis points to 4.25-5.25%,
in line with our current 5% expectation, as a result of solid
growth in domestic demand. We have been highlighting for
some time the widening of the current account deficit - due
to lower exports and stronger imports - from -1.3% of GDP
in 2011 to an average around -4.0% in 2012-13. The central
bank judges that the current account deficit does not at pre-
sent represent a critical threat to the Chilean economy, be-
cause higher investment is focusing on the export sector,
the deficit is being financed by FDI and there is no over-
heating in private borrowing. However, authorities remain
vigilant to any developments that could put economic stabil-
ity at risk. On the inflation front, the CPI decelerated from
2.9% y/y to 2.1% in November, in line with the expectation
that inflation will reach the lower end of the central bank’s
tolerance range in the coming months. Nonetheless, we do
not anticipate any changes to the monetary policy stance.
COLOMBIA - The Colombian peso (COP) resumed its posi-
tive trend in December, recovering 1.5% vis-à-vis the US
dollar and closing the year with a solid 7.9% gain. The cur-
rency remains vulnerable to international financial market
sentiment and local economic dynamics. Weak external

demand has weighed on the Colombian economy since the
second quarter of the year, while local consumption has
maintained stronger momentum. However, some signs of
moderation in domestic demand have emerged in recent
months. The industrial sector has been the hardest hit by
weak global demand, falling 1.3% y/y in September, the
second consecutive contraction since April-May. Retail
sales rebounded slightly in the same month, expanding by
2.3% y/y, with sales excluding the auto sector accelerating
to 6.2% y/y. In the context of recent developments and with
inflation recently below the mid-point of the central bank’s
target range, the central bank cut the reference rate by 25
basis points to 4.50% in November (we previously anticipat-
ed the cut to take place at the December meeting). We
maintain our view that the central bank will move towards a
more neutral monetary policy stance in the coming months
as household debt remains high and credit growth contin-
ues to grow at relatively elevated rates, despite the eco-
nomic deceleration. A fiscal reform package, currently being
debated in the Congress, will draw foreign investors’ atten-
tion in the coming weeks as taxes; foreign inflows are ex-
pected to increase.
DEVELOPING AMERICAS
Fundamental Commentary Daniela Blancas +1 416 862-3908

Global Economic Research
13

Foreign Exchange
Outlook

December 20, 2012
G
LOBAL
C
URRENCY FORECAST
(end of period)
2011 2012f 2013f 2014f
Q3aQ4Q1Q2Q3Q4Q1Q2Q3Q4
MAJOR CURRENCIES
Japan
USDJPY 77 84 90 92 78 84 85 87 89 90 90 91 91 92
Euro zone
EURUSD 1.30 1.33 1.27 1.25 1.29 1.33 1.30 1.29 1.28 1.27 1.26 1.26 1.25 1.25
EURJPY 100 111 114 115 100 111 111 112 114 114 113 115 114 115
UK
GBPUSD 1.55 1.63 1.64 1.66 1.62 1.63 1.62 1.63 1.64 1.64 1.65 1.65 1.66 1.66

EURGBP 0.83 0.81 0.77 0.75 0.80 0.81 0.80 0.79 0.78 0.77 0.76 0.76 0.75 0.75
Switzerland
USDCHF 0.94 0.91 0.96 1.00 0.94 0.91 0.93 0.94 0.95 0.96 0.98 0.98 1.00 1.00

EURCHF 1.22 1.21 1.22 1.25 1.21 1.21 1.21 1.21 1.21 1.22 1.23 1.24 1.25 1.25
AMERICAS
Canada
USDCAD 1.02 0.97 0.96 0.94 0.98 0.97 0.97 0.97 0.96 0.96 0.95 0.95 0.94 0.94
CADUSD 0.98 1.03 1.04 1.06 1.02 1.03 1.03 1.03 1.04 1.04 1.05 1.05 1.06 1.06
Mexico
USDMXN 13.94 12.78 13.17 13.05 12.86 12.78 12.93 12.84 12.95 13.17 13.01 12.84 12.89 13.05

CADMXN 13.65 13.17 13.72 13.89 13.07 13.17 13.33 13.24 13.49 13.72 13.69 13.51 13.71 13.89
Argentina
USDARS 4.30 6.00 6.50 7.50 4.70 6.00 6.13 6.25 6.38 6.50 6.75 7.00 7.25 7.50
Brazil
USDBRL 1.87 2.06 2.15 2.20 2.03 2.06 2.11 2.12 2.15 2.15 2.15 2.18 2.20 2.20
Chile
USDCLP 520 475 497 505 475 475 493 494 495 497 498 500 503 505
Colombia
USDCOP 1939 1789 1850 1890 1801 1789 1810 1820 1840 1850 1860 1870 1880 1890
Peru
USDPEN 2.70 2.56 2.49 2.45 2.60 2.56 2.55 2.53 2.51 2.49 2.49 2.48 2.45 2.45
Venezuela
USDVEF 4.29 5.15 5.15 6.70 4.29 5.15 5.15 5.15 5.15 5.15 6.70 6.70 6.70 6.70
ASIA / OCEANIA
Australia
AUDUSD 1.02 1.05 1.08 1.10 1.04 1.05 1.05 1.06 1.07 1.08 1.08 1.09 1.09 1.10
China
USDCNY 6.30 6.25 6.10 6.04 6.28 6.25 6.25 6.20 6.15 6.10 6.09 6.07 6.06 6.04
Hong Kong
USDHKD 7.77 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75
India
USDINR 53.1 54.5 53.0 51.8 52.9 54.5 54.1 53.8 53.4 53.0 52.7 52.4 52.1 51.8
Indonesia
USDIDR 9069 9700 9600 9400 9591 9700 9675 9650 9625 9600 9550 9500 9450 9400
Malaysia
USDMYR 3.17 3.05 3.00 2.95 3.06 3.05 3.04 3.03 3.01 3.00 2.99 2.98 2.96 2.95
New Zealand
NZDUSD 0.78 0.81 0.83 0.84 0.83 0.81 0.81 0.82 0.82 0.83 0.83 0.84 0.84 0.84
Philippines
USDPHP 43.8 41.1 40.8 40.5 41.7 41.1 41.0 40.9 40.8 40.8 40.7 40.6 40.6 40.5

Singapore
USDSGD 1.30 1.22 1.21 1.19 1.23 1.22 1.22 1.22 1.21 1.21 1.21 1.20 1.20 1.19
South Korea
USDKRW 1152 1075 1050 1025 1111 1075 1069 1063 1056 1050 1044 1038 1031 1025
Thailand
USDTHB 31.6 30.6 30.3 29.8 30.8 30.6 30.5 30.4 30.3 30.3 30.1 30.0 29.9 29.8
Taiwan
USDTWD 30.3 29.1 28.8 28.5 29.3 29.1 29.0 28.9 28.8 28.8 28.7 28.6 28.6 28.5
EUROPE / AFRICA
Czech Rep.
EURCZK 25.6 25.2 24.5 24.0 25.1 25.2 25.0 24.9 24.7 24.5 24.4 24.3 24.1 24.0
Iceland
USDISK 123 125 122 120 124 125 124 124 123 122 122 121 121 120
Hungary
EURHUF 315 286 280 278 285 286 285 283 282 280 280 279 279 278
Norway
USDNOK 5.98 5.55 5.30 5.20 5.73 5.55 5.60 5.50 5.40 5.30 5.28 5.25 5.22 5.20
Poland
EURPLN 4.47 4.07 4.00 3.92 4.12 4.07 4.05 4.04 4.02 4.00 3.98 3.96 3.94 3.92
Russia
USDRUB 32.1 30.7 31.8 32.2 31.2 30.7 30.9 31.2 31.5 31.8 31.9 32.0 32.1 32.2
South Africa
USDZAR 8.09 8.51 8.40 8.50 8.31 8.51 8.48 8.46 8.43 8.40 8.43 8.45 8.48 8.50
Sweden
EURSEK 8.92 8.63 8.30 8.10 8.44 8.63 8.60 8.50 8.40 8.30 8.25 8.20 8.15 8.10
Turkey
USDTRY 1.89 1.79 1.75 1.73 1.80 1.79 1.78 1.77 1.76 1.75 1.75 1.74 1.74 1.73
f: forecast a: actual
2013f 2014f
NorthSouth

2012f

Global Economic Research
Foreign Exchange
Outlook


December 20, 2012

Scotiabank Economics

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implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates accepts
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Foreign Exchange Strategy

This report is prepared by The Bank of Nova Scotia (Scotiabank) as a resource for clients of Scotiabank. Opinions, estimates and projections contained
herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or
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