Gabriel Burin
BUENOS AIRES (Reuters) – The Mexican peso will oscillate between a relatively resilient economy and some political doubts, with a slight depreciation expected over the medium term, a Reuters poll of currency experts showed.
The currency has lost 1% year-to-date, a minor decline given the list of headwinds it faces, such as a delay in the start of monetary easing in the United States and higher global volatility due to heightened tensions in the Middle East. .
In 12 months, the peso is forecast to lose another 2.6% to 17.59 per U.S. dollar from 17.13 on Tuesday, still higher than it has been for most of the past eight years, according to the survey’s average estimate.
Among 16 respondents to the April 29-May 1 survey, the weakest forecast for the Mexican currency for the year was 18.70 per dollar, and the strongest was 16.60.
“MXN underperformed as carry weakened, but fundamentals remained intact and Mexico should be the biggest emerging markets beneficiary of US exclusivity,” said Eric Martinez, Latam FX and rates strategist at Barclays.
“Growth tailwinds from supportive friends, close ties with the United States in terms of labor market and monetary policy should continue to support the peso…we remain constructive in the near term as it is too early to trade US election risks.”
As speculators cut carry trades, or bets on emerging market currencies with high interest rates, the Mexican peso has suffered modest losses compared with its Latin American peers.
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Although the country’s central bank cut its benchmark rate by 25 basis points to 11% in March, the board is likely to keep it there longer than markets expect, a key policymaker told Reuters last month.
And while inflation remains a concern, the region’s second-largest economy behind Brazil is expected to grow steadily after the June 2 presidential election, in line with a strong performance in the United States, a separate Reuters poll found.
Former Mexico City mayor and ruling party candidate Claudia Sheinbaum is extending her lead in the race for president. Some economists doubt she will act decisively against the budget deficit if elected, despite her austerity promises.
“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 on the peso outlook this week.
In Brazil, the real is set to rise 3.8% over 12 months to 5.0 per dollar from 5.19 on Tuesday. The currency fell 6.5% in 2024 as investors focused on a deeper deterioration in financial health than Mexico.
(As for other stories from the May Reuters currency survey:)
(Reporting and polling by Gabriel Burin in Buenos Aires; Additional reporting by Anitta Sunil, Susobhan Sarkar and Rahul Trivedi; Editing by Ross Finley and Alison Williams)