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15 May 2015
Mexican peso could pick up pace later in the year – HSBC
FXStreet (Edinburgh) - In the view of analysts at HSBC, the undervalued Mexican peso could attempt a recovery in the medium term.
Key Quotes
“Policymakers in Mexico remain concerned over the prospect of portfolio capital outflows as the Fed nears its first hike”.
“Pre-emptive rate hikes are apparently on the table as a deterrent, despite domestic economic conditions not warranting monetary tightening at this time”.
“Other measures have already been taken to stabilise the currency, including selling USD200m if the currency weakens 1.5% in a day, and selling USD50m in FX reserves each day into June (this may be extended)”.
“We believe the MXN has the ability to outperform its peers in the region and even make modest gains between now and year-end”.
“Assuming the US economy continues to improve, and oil prices can at least stabilise following their recent modest recovery, then given the relative cheapness of the MXN and attractive yields (6% for 10- year yields) we would expect the MXN to stage a modest recovery”.
Key Quotes
“Policymakers in Mexico remain concerned over the prospect of portfolio capital outflows as the Fed nears its first hike”.
“Pre-emptive rate hikes are apparently on the table as a deterrent, despite domestic economic conditions not warranting monetary tightening at this time”.
“Other measures have already been taken to stabilise the currency, including selling USD200m if the currency weakens 1.5% in a day, and selling USD50m in FX reserves each day into June (this may be extended)”.
“We believe the MXN has the ability to outperform its peers in the region and even make modest gains between now and year-end”.
“Assuming the US economy continues to improve, and oil prices can at least stabilise following their recent modest recovery, then given the relative cheapness of the MXN and attractive yields (6% for 10- year yields) we would expect the MXN to stage a modest recovery”.