The Brazilian real and Mexican peso have both rebounded strongly in recent weeks, but their rallies are starting to diverge with the peso running ...
The Brazilian real and Mexican peso have both rebounded strongly in recent weeks, but their rallies are starting to diverge with the peso running out of steam and the real gaining momentum.
The peso's selloff faded earlier, and it has appreciated 15per cent against the U.S. dollar since mid-April. Brazil's real hit a record low in mid-May but has rebounded more than 20per cent. "The laggards before are the winners now. No one is long the real, it is widely under-owned," he said, adding that a sustained break through 5.00 per dollar could accelerate the move .
Brazil's economic and financial position is far from stellar. The economy is poised for its biggest-ever annual slump of more than 6per cent, according to consensus forecasts, and the government's deficit and debt will balloon to record levels. This is what initially happened to state-owned Pemex's bonds after Moody's in April became the second ratings agency to cut the firm's debt rating to 'junk' status.
A recent central bank survey showed investors expect the peso will end this year at 23 per dollar, weaker than the 21.90 it was trading at on Thursday. The survey also shows the economy will shrink by 8per cent this year, more than the consensus forecast for Brazil.
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