Latin American national currencies have soared this year and are about to face a round of interest rate cuts.
Latin American currencies represented four of the five best performers this quarter, benefiting from lower volatility and higher rates.
“Brazil’s currency and Mexico’s currency have reached the target, and there are concerns that they can make additional gains as both central banks are likely to start cutting interest rates,” said Esther Reichelt, strategist at Commerzbank in Frankfurt.
Markets are now focused with the Chilean Peso, as they await the Central Bank of Chile’s interest rate decisions.
Plenty of negative factors could leave the peso, which is down about 1% this quarter, under further pressure.
In Peru, Seoul’s 3.6% rise this quarter was fueled by reports that President Dina Pollarte will remain in office until 2026, calming years of political turmoil.
But Peruvian central bank governor Julio Velarde says interest rate cuts may begin in the coming months.
The Colombian peso is likely to stabilize around current levels after a sharp appreciation of 17% this year.
