Mexico Peso's Top Forecaster Sees Rally for Worst Major Currency

  • Mizuho's Harajli most accurately predicted peso level for 2015
  • Country's close trade ties with U.S. provide economic support

Mexico’s peso, the worst performing major currency in 2016, is poised for a rebound by the end of this year, according to its most-accurate forecaster.

Its 30 percent depreciation in the past year and a half is making the economy more competitive for manufacturers looking for lower costs, and that should help fuel growth that eventually reverses some of the losses, according to Sireen Harajli, a strategist for Mizuho Bank Ltd. who was the best analyst for the peso in the fourth quarter, according to a Bloomberg ranking.

“It makes for sounder economic fundamentals,” Harajli, who has been covering the peso for five years at Mizuho and Credit Agricole SA, said in an interview. “Despite the weakness we’re expected to see in the peso, we think that for the longer term it’s certainly” among the stronger currencies in Latin America.

The peso, the world’s most-traded emerging-market currency, has tumbled 7 percent this year on concern that a slump in China will lead to slower global growth and as the plunge in oil prices dims the prospect for investment in Mexico’s energy industry. The losses this year come after the peso outperformed its Latin American peers in 2015 as Mexico posted better economic growth than its commodity-dependent peers.

Mexico’s gross domestic product expanded 2.5 percent last year, when Latin America as a whole shrank 1 percent, according to the economists surveyed by Bloomberg. They forecast Mexico will expand 2.8 percent this year and 3.1 percent in 2017.

The peso touched a record 18.8024 per dollar last week, the lowest since a 1993 redenomination, and traded near 18.49 at 9:09 a.m. in New York on Tuesday. Harajli, a 37-year-old who graduated with a degree in sociology and anthropology from the American University of Beirut before getting an MBA from Fordham University, forecasts the peso will gain 6.9 percent to end the year at 17.3 per dollar and strengthen to 16.3 at the end of 2017.

Central Bank governor Agustin Carstens told the Wall Street Journal on Sunday that he sees a “major correction" in the currency, adding that Mexico has been unfairly lumped together by investors with other emerging-market economies, leaving the currency severely undervalued.

“The fact that Mexico has one of the most sophisticated financial markets in the region" puts it in a position to benefit from positive global developments, Harajli said. “At the same time, the fact that it has strong trade relations with the U.S. provides support for the Mexican economy."

Before it's here, it's on the Bloomberg Terminal.