Peso predicted to make comeback in 2018: BloombergBy Elliot Bullman
According to top financial forecasters andBloomberg collaborators Eric Martin and Justin Villamil, the Mexican peso is expected to make a big comeback this year.
For all the concern that the U.S. might dump Nafta or that Mexico’s next president could upend economic policy, the peso is forecast to be the world’s best-performing major currency in the first half of 2018.
True, the expected gain is due in no small part to how much it sank at the end of last year.
The peso tumbled to a nine-month low against the dollar on Dec. 26, capping a four-month decline fuelled by worries Donald Trump will pull out of the trade agreement with Mexico and Canada, and that Andres Manuel Lopez Obrador could win election in July.
The peso lost a third of its value during the past four years, when it was the worst performer among the world’s most-traded currencies.
Yet the forecast also reflects Mexico’s growth potential, stronger fiscal position and narrowing current account deficit,particularly as the year wears on, said Ernesto Revilla, who heads Latin America economics at Citigroup Inc.
His bank expects the peso to rally more than 5 percent during the next six months to a year, and to reach 17 per dollar — 14 percent stronger — beyond a year, or in the “long term.”
The bank’s peso forecast assumes "macroeconomic stability" and "continued implementation of economic reforms," Revilla said. If the presidential winner takes a different policy path, Citigroup could reconsider its projections.
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