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In Latin America, among the most devalued currencies is the Colombian peso, which has lost around 14% of its value so far this year, followed by the Argentine peso and the Peruvian sol, while analysts expect the rebound in raw materials can cushion depreciation.
The currencies of Latin America have lost a considerable value against the dollar, with the exception of the Brazilian real, at the same time that many families begin to feel the cost of products and see how the money they receive disappears.
In the region, the Colombian peso is the currency that has lost the most value against the dollar, 14% estimates Bloomberg, while the Argentine follows it at 13%, the Peruvian sol at 11%, the Chilean peso around 8% and the Mexican in 1%.
“When interest rates fall in the United States, the appetite for stocks or other risky assets increases, for example, debt instruments of emerging sovereigns such as Colombia, Mexico, Brazil and, above all, if the differential between the returns on these types of instruments relative to the returns on US sovereign debt, “says Jorge Hernando García Castro, an expert in financial markets.
García adds that the recovery of employment in the United States, as well as the threat of the new Omicron variant of the coronavirus, would be pushing the dollar as a world reference and causing a disinterest in emerging currencies, among which are Latin American ones.
“Additionally, this massive liquidation of positions in risky assets takes place when the appetite for them decreases. Currently in the United States, interest rates are expected to rise faster than expected in 2021. The new variant of the coronavirus may further accentuate supply chain disruptions, generating greater inflationary pressures, ”adds García.
The expert gives the example of Mexico, which, although it achieved good positions in the first months of the year, sees how its currency is now in the ranking of those that lose ground against the green currency.
“The Mexican peso had managed to stay strong mainly because Mexico was managing to attract and retain capital due to the yields of sovereign debt denominated in Mexican pesos, much more attractive than other sovereign debt,” says García.
“The labor market is reaching its full potential and inflationary forces are already high, so the Federal Reserve is forced to complete its reduction earlier than expected and may have to raise interest rates faster than many expect, “Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, told Reuters.
Several analysts hope that the strength of raw materials, on which the main Latin American economies depend, will cushion the impact on local currencies, but in recent months the markets have witnessed great volatility as a result of the pandemic.
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