LatAm FX to Outperform Other EM

Merrill Lynch says it expects LatAm currencies to outperform those of Asia and the EMEA in the first half of 2009 as “a good portion of LatAm corporates already cleaned their derivatives positions.” This, says the shop, should help the BRL and MXP. However, it warns that the CLP and PES, which are highly dependent on commodities, could underperform compared to other LatAm currencies, but for now has positive expectations. The BRL is expected to strengthen to BRL2.05 by June, the peso to MXP12.00, the CLP to 620 and the PES to 3.00. On January 8, the BRL stood at 2.26, the MXP at 13.65, the CLP at 627 and the PES at 3.17. By the end of 2009, the shop expects the positive trend to continue. By then, Merrill sees the BRL at 1.90, the MXP at 11.50, the CLP at 580 and the PES at 2.95.