Mexico Peso's Best Forecaster Says Fundamentals to Spur Recovery

  • Harajli was most accurate peso forecaster last quarter 2015
  • Mexican peso lost 18% versus dollar in past 12 months

Mexico’s peso will strengthen by the end of the year as economic fundamentals overcome the volatility spurred by a bearish outlook for emerging markets, according to Sireen Harajli, the currency’s most accurate forecaster at the end of last year.

Harajli, a currency strategist at Mizuho Bank Ltd. in New York, said measures announced by the government and central bank last week will support the peso, helping fight off the downward pressure created by investors who use it as a proxy hedge to protect against emerging-market declines. The peso has dropped 9.6 percent in the past three months, the second-worst performance among the world’s major currencies.

Mexican policy makers cited the damage done by short sellers seeking to mitigate risk after they raised interest rates at an unscheduled meeting and revamped their currency intervention program on Feb. 17. Mexico’s economy is growing faster than most of its peers, with gross domestic product expanding 2.5 percent in the last quarter of 2015. Inflation remains within the central bank’s target range.

“Recent market conditions have been terribly unfriendly for the MXN despite the country’s solid fundamentals," Harajli said in a note Thursday. “Negative effects from higher volatility will be mitigated by central bank policy as Banxico aims to curb excessive currency weakness. Fundamentals will prevail in the second half of the year."

Harajli, who Bloomberg data showed came the closest to predicting where the peso would be trading at the end of 2015, sees the currency trading in a range of 18 per dollar to 18.5 per dollar in the first half of 2016 before closing this year at 17.3 per dollar.

The peso gained 0.2 percent trading at 18.1829 per dollar at 12:25 p.m. in New York.

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