June 25, 2022

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The peso is the emerging currency with the best performance in the pandemic: BofA

May 24, 2022 | 8:28 AM

The Mexican Peso It established itself as the best performing emerging currency since the start of the pandemic by COVID-19Although political uncertainty remained high and Mexico’s growth was weak, Bank of America highlighted in an analysis (Bank of America).

According to the analysis Mexico: A strong peso is here to staythe financial institution identified three economic factors attributable to the superior performance of the peso, highlighting a inability short current account; a surplus In the primary balance and a interest rate Royal high.

We expect these factors to continue, as the current administration strongly favors a stable and relatively strong peso.

Bank of America noted in its analysis.

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The peso rose 17.5% against the dollar

BofA determined that the peso had strengthened 17.5% Against the dollar since April 2020, being the emerging currency with the best performance since the pandemic against other countries such as Brazil, Chile, Czech Republic and India.

The result was as surprising as growth in Mexico was weak. For example, Mexico narrowly escaped a technical recession in the second half of 2021, with a contraction in the third quarter and a flat period in the fourth, the bank reported.

For Bank of America, persistently weak growth in Mexico should be consistent with a exchange rate Structurally weaker, so you expect the local currency to gradually depreciate to reach 21 pesos per dollar at the end of the year and 22 units at the end of 2023.

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When the devaluation of the peso arrives, we believe that Mexico is unlikely to face a financial crisis, as both the public and private sectors appear to be experiencing a relatively low trend of external debt. Additionally, many Mexican companies with dollar debt are naturally hedged with dollar sales.

Emphasis on BofA.

Global markets are in an “antagonistic buying zone”

Trillions cleared from global markets in recent weeks have led to a conflicting ‘buying’ signal from BofA’s ‘Bull & Bear’ sentiment gauge, as emerging markets are going through their toughest times since the height of the pandemic. by COVID-19.

fears that economic inflation Rapidly increasing rates are driving major economies to Recession Global markets have led to a downward spiral as global stocks have lost nearly 18% since the start of the year, the worst start to the year ever in recent times.

BofA analysts shared that their “Bull & Bear” index has now moved into “unmistakable opposite buying territory,” given the massive volume Stock market redemptions Sophisticated, high-return, high-risk debt and emerging market bonds.

Read on: AMLO’s anti-inflation plan will cut 1.3% of inflation: BofA