FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that the peso remains well within the high-beta camp despite the good macroeconomic management.
Key Quotes:
“The peso has fallen nearly 18% over the last 12 months, ranking amongst the worst performers. Curiously, we suspect that part of this volatility comes from Mexico’s own success. With rates at 3.0%, it doesn’t have the interest rate buffer that Brazil, Turkey, India, or South Africa has. Moreover, the typical daily volume is somewhere around $10-15 bln in spot and, $5-10 bln in forward markets. This is about the same of Brazil, even though Mexico’s economy is about 35% smaller.
But probably the most important factor is that the peso is freely tradable, in contrast to the other currencies in the region. We note that the CFTC reports that for the latest week ended July 7, the non-commercial (speculative) community has built up a record high net short MXN position of -72415 contracts. Long contracts have remained fairly steady around 30000 after the April plunge, but short contracts have risen to a record high -96482. While it may be tempting to say this is purely a bearish MXN call, we do think part of this is that MXN is being used as a proxy for the wider EM class.”
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