Don’t let the Mexican currency’s rally this year turn you off. Strategists from Morgan Stanley to BNP Paribas SA say it’s a great bet.
The peso has risen 15 percent this year to trade at 18.0759 per U.S. dollar on Thursday on speculation the U.S. is less likely to pursue a damaging renegotiation of the North American Free Trade Agreement. Wall Street banks, and even Mexico’s central bank Governor Agustin Carstens, insist the currency’s still cheap.
Some analysts have boosted their forecasts for the peso to levels last seen before Donald Trump was elected after campaigning on a pledge to protect American workers by cracking down on Mexican imports. Since March 31, economists surveyed by Bloomberg have raised their first-quarter 2018 estimates by the most of any Latin American currency, according to data compiled by Bloomberg.
"Our favored currencies are those that still have cheap valuations that can attract inflows and are supported by improving growth, " Morgan Stanley analysts led by Hans-Guenter Redeker wrote earlier this month. "Positive headlines about the direction and the speed of the changes should bolster the currency."
JPMorgan Chase & Co. upgraded its peso forecast this week to 18.5 per dollar at the end of the year, compared with a previous prediction of 19.8. Morgan Stanley now sees it gaining 3.7 percent to end the year at 17.5, an improvement from an earlier forecast of 20.3.
Source: Bloomberg Pro Terminal
Junior Trader Stefan Panteleev
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