MXP and COP Sliding

The currencies of Mexico and Colombia have slid since the start of the year, affected by risk aversion and the global economic slowdown, but they are expected to strengthen by the end of the year. “There is a considerable amount of risk aversion, so the depreciation is not due to speculation. People are buying dollars to avoid risk,” says Doug Smith, chief economist for the Americas at StanChart. Ociel Hernandez, an analyst at Bancomer agrees, adding that the MXP’s fair actual value would be 12.50-13.50 per dollar. The COP, says Smith, has suffered due to a drop in export activity in the country, especially to Venezuela, one of its major trading partners. That is in addition to the flight to quality which is also affecting MXP. Since January 1, the MXP has gone to 14.59 from 13.77 per dollar. The COP has flared to 2,538 from 2,244 in the same period. Hernandez says he expects MXP to fluctuate between 13.80-14.50 during the first half of 2009 and between 13.30-14.00 in the second half. StanChart expects the COP to trade at 2,100 by the end of the first half of 2009 and 1,950 by the end of the year.