By Gabriel Burin
BUENOS AIRES (Reuters) – The Mexican peso will balance between a relatively strong economy on the one hand and some political doubts on the other, with a small depreciation expected in the medium term, a Reuters poll of currency traders shows. experts.
The currency has lost 1% this year, a small decline considering the list of negative factors facing the currency, such as the delayed start of monetary policy easing in the United States and higher global volatility due to heightened tensions in the Middle East.
The peso is expected to fall 2.6% more to 17.59 per US dollar over 12 months, compared to 17.13 on Tuesday, which would still leave it stronger than during the largest period, according to the survey’s average estimate. part of the past eight years.
Among the 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.
“MXN has underperformed during a period of carry reduction, but fundamentals have not changed and Mexico should be the biggest beneficiary of US exceptionalism in emerging markets,” said Erick Martinez, Latam FX and rates strategist at Barclays .
“Friendshoring growth and close labor market and monetary policy ties with the United States should continue to support the peso… we remain constructive in the short term as it is too early to trading US election risks.’
As speculators scale back their carry trade positions, or bets on emerging market currencies with high interest rates, the Mexican peso is posting modest losses compared to other Latin American countries.
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While the country’s central bank cut rates by 25 basis points to 11% in March, the board of governors is likely to keep them at that level for longer than markets expect, a key policymaker told Reuters last month.
And while inflation remains a challenge, the region’s second-largest economy after Brazil is poised to grow steadily after the June 2 presidential election, in line with decent performance in the United States, a separate Reuters poll showed.
Former Mexico City mayor and party candidate Claudia Sheinbaum is widening her lead in the race for the presidency. Some economists doubt she will take decisive action on budget deficits if elected, despite her promises of spending cuts.
“There is significant uncertainty about the impact (if not the outcome) of the Mexican elections in June, as well as the US elections in November,” Capital Economics analysts wrote in a note this week on the peso’s outlook.
In Brazil, the real should rise 3.8% in 12 months, from 5.19 on Tuesday to 5.0 per dollar. The currency is down 6.5% so far in 2024 as investors focus on a fiscal deterioration deeper than Mexico’s.
(For other stories from the May Reuters currency survey:)
(Reporting and polling by Gabriel Burin in Buenos Aires; additional polling by Anitta Sunil, Susobhan Sarkar and Rahul Trivedi; Editing by Ross Finley and Alison Williams)
