Analyst who predicted stronger peso is still bullish on the currency

The peso has strengthened since the electionThe peso has strengthened since the election. BLOOMBERG

Analyst who predicted stronger peso is still bullish on the currency

Latest prediction is it will reach 18 to the dollar by the end of the year

One of just two analysts who predicted the peso would strengthen after the July 1 election is still bullish, Bloomberg reported today.

Ilya Gofshteyn at Standard Chartered Bank in New York forecast the currency would strengthen past 19 to the dollar during this quarter.

It has gained more than 5% since the election to about 18.85 per dollar, the best performance among more than 40 currencies tracked by Bloomberg.

Now it will reach 18 to the dollar by the end of the year, predicts Gofshteyn, who expects a new NAFTA agreement by early next year.

A United States trade war with China would be good for Mexico as companies move their purchases to Mexico to avoid tariffs on Chinese goods. Barriers for Chinese goods mean an advantage for Mexican producers, the analyst said.

Source: Bloomberg (en)

The strength of the dollar against the peso is the main reason for foreigners buying real estate in Mexico right now.

The strength of the dollar against the peso is the main reason for foreigners buying real estate in Mexico right now. In 2016 and 2017 the number of closed sales to foreigners rose to 1,105 on an annual average. From 2008 to 2015 it was 663 on average, according to information obtained through a Transparency request to the Ministry of Foreign Affairs (SRE); so far in 2018 there are 290 properties sold to foreigners.

This investment occurs mainly in the historic centers of colonial cities such as San Miguel de Allende, as well as in the border strip and beach destinations, such as Los Cabos and Cancun.

Mexico ranks first of 30 in favorite US and Canadian destinations for second home searches, according to research conducted by the property portal Point2 Homes. From January 2017 to January 2018, the most sought after locations on Google were beaches such as Puerto Vallarta, Playa del Carmen, Cabo San Lucas and Cancun, as well as destinations such as San Miguel de Allende.

For this year it is estimated that there will be between 1,300 and 1,500 home acquisitions by foreigners, which represents a growth of almost 30%, said Miguel Ángel Lemus Mateos, director of Lemmus Resort Real Estate México.

Currently, the housing inventory of the Mexican Association of Real Estate Professionals (AMPI) is 420,000 housing units, and foreign investment operations represent 3%.

For some time now, several entities of the real estate market in the country have been looking for the modification of the constitutional Article 27, which would facilitate the purchase of properties by foreigners. This is because it would have a positive impact on the sector, especially in relation to tourist housing, since there would be an increase of 30% in sales of these properties.

The information provided through the Transparency Unit only refers to the total of transactions, but not to the location or payment for the property, adhering to the provisions of the Federal Law of Transparency and Access to Government Public Information and its Regulations, as well as the Internal Regulation of the SRE, with the purpose of safeguarding and protecting the property of the client.

Mexican peso hits 10-month high.

Mexican peso hits 10-month high

June 9, 2017

Mexico’s peso currency reached an almost 10-month high on Friday and data on derivatives market bets showed investors have taken the most optimistic view on the currency in four years.

The Mexican currency clawed its way back to levels last seen before the election of Donald Trump as U.S. president as higher oil prices helped lift emerging market currencies.

The peso firmed to 18.1125 pesos per dollar, its best level since Aug. 18, but then pulled back a bit to trade around 18.17 per dollar, about 0.1 percent stronger on the day.

Trump’s election victory drove the currency to a record low on fears he would rip up a trade deal with Mexico.

But the peso has bounced back and it has been the best-performing major currency this year, up more than 14 percent against the dollar, as the Trump administration moved toward talks to renegotiate the North American Free Trade Agreement.

“The peso has more room to appreciate,” said Marco Oviedo, an economist at Barclays in Mexico City, citing fewer clouds over the NAFTA deal, as well as less concern about Mexico’s political landscape combined with bets on higher interest rates.

The peso gained ground this week after data on Thursday showed a jump in inflation to an eight-year high that backed expectations of more central bank interest rate hikes. Higher interest rates lift the appeal of the peso to foreign investors.

That added to gains seen Monday after the ruling party managed to hold onto the governorship in the populous State of Mexico, according to preliminary results.

President Enrique Pena Nieto’s PRI party fended off a challenge there from new leftist party founded by populist Andres Manuel Lopez Obrador, who leads in early polls for next year’s presidential race.

Analysts have warned that signs Lopez Obrador is gaining ground could weigh on the peso due to uncertainty about what he could do to free-market reforms seen under Pena Nieto, such as an opening of the energy sector to private investment.

Data on Friday showed the number of bets by speculators for a stronger peso rose to a four-year high.

Long positions recorded by the Commodity Futures Trading Commission data rose to 115,601 contracts, the highest since late May 2013, as of June 6, the latest data.

Some analysts think investors have become too confident in more peso gains. Analysts at Citi this week warned they would not make big bets on further gains in the peso at these levels after analyzing other rallies in emerging market currencies seen since 2004.

(Reporting by Sheky Espejo and Michael O’Boyle; Editing by Bill Trott)

Trump makes Mexican peso great again; investors see more gains ahead.

   Feb 03, 2017

Mexico’s peso has improbably been the world’s top-performing currency since Donald Trump’s presidential inauguration, and an increasing number of emerging market fund managers said it could rebound further from its nosedive following the U.S. election.

Even before its inauguration comeback, a number of emerging market fund managers were betting that the peso had seen its worst days and was poised to outperform in 2017 along with other Mexican assets.

“We’ve gone from an outright short late last year to an overweight position relative to the index, just because there’s a lot of bad news priced in,” said Jim Barrineau, Schroders’ head of emerging markets debt and portfolio manager for its multi-sector bond fund.

“The real exchange rate is very, very cheap relative to history, and at this point, the bond yields are competitive with the higher yielding countries in EM.”

The peso was up 8 percent since Trump’s inauguration on Jan. 20 despite his proposal last week of a 20 percent border tax on Mexican imports and the collapse of a scheduled face-to-face meeting with Mexican President Enrique Pena Nieto.

The peso also made a technical breakout Friday, rallying through a resistance point at the 20.56 level, around where it closed on Thursday. That level marks a 38.2 percent Fibonacci retracement of its sell-off since the Nov. 8 election.

“Perceiving the 20 percent import tax comment as a starting point for negotiations, the market took some solace because it could have been much higher, say 30 percent or 35 percent,” said Gordian Kemen, global head of emerging market fixed income strategy for Morgan Stanley.

The peso has continued its tear even as Trump has reiterated concerns about the North American Free Trade Agreement, saying on Thursday he would like to speed up talks to either renegotiate or replace the deal.

Kemen said investors were relieved Trump did not move to unilaterally withdraw from NAFTA or rule out talks entirely.

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And though investors have in the past wagered at their peril that Trump’s often extreme rhetoric would not be matched by his real-world actions, many are betting that the current price of Mexico’s peso already reflects the worst of any potential U.S. action against the country.

Deutsche Bank asset managers said earlier this week they believed the peso had hit a near-term bottom.

Similarly, Michael Gomez, PIMCO’s head of emerging markets portfolio management, said that while he expects the background to remain noisy, “Mexican assets and the peso specifically already incorporate much of the expected downside risk.”

UBS strategists recently said in a research note that even the border tax had been 70 percent priced into the peso’s value.

That’s not to say big risks do not remain, especially given the recent bounce.

“The peso is cheap certainly and absent a big unfavorable change to NAFTA, you will make great money investing in Mexican bonds. But a change to NAFTA that’s unfavorable, and who knows,” said Kieran Curtis, investment director at Standard Life Investments in London, adding that he still sees Mexico as a “deteriorating credit.”

Each firm calculates a currency’s “fair value” differently, but generally valuations are derived by comparing the ability to buy the same goods in different countries or measuring the value of income and investment an economy takes in against what it spends.

Fund managers interviewed by Reuters largely agreed that the peso was at a level inconsistent with the reality of its economy, but some remained wary of further Trump-related surprises.

While he holds slightly overweight positions in Mexican debt, including local currency bonds, Gorky Urquieta, co-head of emerging market debt at Neuberger Berman, said aggressive unilateral U.S. imposition of tariffs or an unwind of NAFTA would likely hit the peso again.

“As much as we think the currency is undervalued, it could become even more undervalued before it begins a sustained recovery,” he said.

(Reporting by Dion Rabouin; Additional reporting by Sujata Rao and Jennifer Ablan; Editing by Christian Plumb and Cynthia Osterman)