FXStreet (Edinburgh) – Analyst Ezequiel Aguirre at BAML believes the Mexican peso could appreciate vs. some of its EM colleagues in the medium term.
Key Quotes
“Upcoming interest rate hikes in the US and declining commodity prices are putting significant downward pressure on emerging market currencies”.
“However, we expect MXN to outperform other emerging market currencies due to its stronger links with the US”.
“The exchange rate is 8% undervalued in real trade-weighted terms according to
Compass. The correlation between the Mexican peso and oil prices has been declining consistently, possibly due to Mexico turning a net crude importer”.
“However, lower oil prices may negatively affect future FDI inflows into the energy sector”.
“Banxico also considers the exchange rate to be cheap and has stepped up its rule-based intervention, auctioning $200mn daily without a minimum price until 30 September. In addition, it will also auction another $200mn on days the peso weakens by at least 1%. It can extend the program if deemed necessary”.
(Market News Provided by FXstreet)