Mexico Winning the Hearts of FX Traders as Brazil’s Appeal Dims
- End to Brazil rate hikes, upcoming election may weigh on real
- BRL/MXN has breached 200-DMA, opening room for move to extend
Photographer: Susana Gonzalez/Bloomberg
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Traders of Latin American currencies have fallen out of love with this year’s star performer and shifted their focus northward.
Fueled by big leaps in policy rates, improved terms of trade and flows into the local stock market, the Brazilian real has been this year’s standout, at one stage rising as much as 21% versus the greenback. More recently, however, it has underperformed the region’s other big hitter: the Mexican peso. Buttressed by strong remittances, attractive volatility-adjusted interest rates and the potential for US companies to shift production to Mexico from China, the peso is climbing relative to emerging-market peers.