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Can the Mexican peso navigate between a firm economy and a presidential election?

by sanmigueltimes
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Mexico’s peso is set to navigate between a relatively firm economy on one side and some political doubts on the other, with a small depreciation expected in the medium term, a Reuters poll of foreign exchange experts showed.

The currency has lost 1% year-to-date, a minor drop given the negative factors it faces, such as the delayed start of monetary policy easing in the United States and higher global volatility due to elevated tensions in the Middle East.

In 12 months, the peso is forecast to shed 2.6% more to 17.59 per U.S. dollar from 17.13 on Tuesday, which would still leave it at a stronger rate than during most of the last eight years, according to the survey’s median estimate.

Among 16 respondents in the April 29-May 1 poll, the weakest forecast for the Mexican currency in one year was 18.70 per dollar and the strongest was 16.60.

“The MXN has underperformed amid a carry unwind, but fundamentals have not changed and Mexico should be the biggest beneficiary in emerging markets of U.S. exceptionalism,” said Erick Martinez, Latam FX and rates strategist at Barclays.

“Growth tailwinds from friend-shoring, close links to the United States in terms of the labor market and monetary policy should continue supporting the peso … we remain constructive near-term as it is too soon to trade U.S. election risks.”

As speculators cut “carry trade” positions, or bets on currencies of emerging market countries with high interest rates, the Mexican peso is notching up modest losses compared to other Latin American peers.


San Miguel Times

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