Latin American FX has been surprisingly resilient on the back of good carry and strong commodities and has received a further boost from cautious central banks that started hiking rates earlier than in developed markets.
This was the view of JPMorgan analysts in a recent research note, but there are several reasons why this resilience could be sorely tested in the coming months. These include low expectations for significant appreciation against the dollar as commodities weaken and high inflation limiting real rates improvement.
COP has a large current account deficit and we expect political risk premia to remain high
Oliver Harvey, Deutsche Bank
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