Starting in 2024, Latin American currencies will show mixed results against the US dollar. The Mexican peso and Peruvian sol are gaining value.
However, according to Bloomberg, the Colombian peso, which was strong in 2023, is now losing ground.
After a good 2023 for most Latin American currencies, analysts are watching key factors this year.
They focus on US inflation and Federal Reserve policies. These factors will largely dictate currency performance.
In the US, inflation rose to 3.4% by December. This high rate lessens the chances of the Federal Reserve cutting interest rates soon.
This year, decisions by each Latin American central bank and their government reforms will be crucial, so they will greatly impact currency values.
A report by Ita highlights that Latin America will have important political events soon. In Mexico, the June presidential elections are drawing investor attention.
For Argentina, challenges await the new administration under President Javier Milei. The country is grappling with economic imbalances and limited congressional support.
After rejecting a constitutional draft in Chile, the government’s minority position in Congress is leading to structural reform efforts.
In Peru, a new political reform could reintroduce a bicameral system. This change might ease conflicts between the executive branch and the unicameral Congress.
Deutsche Bank AG’s George Saravelos suggests the dollar could strengthen in 2024. This might happen even if the Federal Reserve cuts rates, as reported by Bloomberg News.
As for currency values, the Mexican peso appreciated by 0.34% as of January 11. The Peruvian sol also saw a slight increase of 0.09%.
On the other hand, the Brazilian real, Argentine peso, Colombian peso, and Chilean peso all saw decreases. Their values dropped by 0.29%, 0.86%, 1.78%, and 3.51%, respectively.
Projections
Bloomberg’s projections for 2024 and 2025 show diverse expectations for these currencies.
In Q1, analysts anticipate the Argentine peso reaching ARS$917.50 and projecting a year-end value of ARS$1,530. By 2025, it may potentially reach ARS$2,000.
For the Brazilian real, the forecast begins at R$4.91 in Q1, moderating to R$4.90 by the end of the year. After that the projection for 2025 stands at R$4.86.
The Mexican peso is predicted to be at MXN$17.67 this quarter, with a slight increase to MXN$17.70. By the next year, it could reach MXN$17.10.
The Chilean peso is forecasted at CLP$875 this quarter, decreasing to CLP$850 by the year’s end. Consequently, in 2025, it might settle at CLP$833.
The Colombian peso is expected to reach COP$4,000 this quarter, with a year-end estimate of COP$4,200. Next year, it could be at COP 4,310.
However, the Peruvian sol is projected to reach PEN$ 3.75 this quarter, decreasing to PEN$ 3.69 by the end of the year. By 2025, it’s anticipated to be PEN$3.60.
Itaú’s projections differ slightly from other forecasts. They anticipate the Argentine peso to reach ARS$2,000 in 2024 and further increase to ARS$3,135 in 2025.
Similarly, BBVA and Wells Fargo offer their own unique predictions.
In conclusion, these projections provide a comprehensive view of the expected currency trends in Latin America for 2024 and beyond.