Goldman Sachs Names Its Favorite Latin American Currencies

Latin America · Markets

In a year when investors are hunting for yield, Wall Street is pointing them south, betting that several Latin American currencies have the ingredients to keep outperforming.

Goldman Sachs has singled out a handful of Latin American currencies as among its preferred bets within the emerging-market world, citing a mix of favorable terms of trade, attractive carry returns and country-specific strengths. The view places the region at the heart of one of 2026’s most profitable trades and reflects a broader conviction on Wall Street that, despite political and trade uncertainty, parts of Latin America still offer some of the best risk-adjusted returns in currency markets.

Why Goldman favors these Latin American currencies

The case rests on three pillars. Terms of trade, the ratio of export to import prices, have been buoyed for commodity exporters by firm prices for oil, metals and farm goods, strengthening currencies such as Brazil’s real and Colombia’s peso.

Carry, the return an investor earns from holding a higher-yielding currency funded in a low-yielding one, remains generous in a region where central banks have kept interest rates high to fight inflation. And local factors, from credible policy frameworks to improving external balances, round out the picture.

Goldman’s strategists have recommended clients hold an equally weighted basket of high-yielding currencies, an approach that spreads the bet across several names rather than concentrating it in one.

The peso at the center of the trade

Mexico’s peso has been a standout. The bank has long described it as sharing the characteristics of a good carry currency, a high real interest rate, improving external balances and a credible policy framework, and its tight integration with the U.S. economy adds support when American growth holds up.

The currency has been one of the stronger emerging-market performers in 2026, though some other banks have begun to question how much further it can climb as global interest-rate differentials narrow and the review of the USMCA trade pact looms. The broader carry strategy, often funded in low-yielding currencies such as the Japanese yen, has returned roughly 12% this year, its best start since 2023, helped by a surge in oil prices that lifted commodity-linked currencies.

The risks beneath the returns

The strategy is not without danger. Goldman has flagged that the main risk to its constructive view is crowded positioning in relatively illiquid currency markets, which can reverse sharply on a negative shock, whether a spike in global risk aversion, an oil-price reversal or a political surprise.

Several countries in the region face elections and trade frictions that could unsettle markets, and analysts caution that the same high rates fueling the carry trade also signal underlying inflation problems. For now, though, the combination of strong commodity prices and wide yield gaps has kept Latin American currencies in favor, and Goldman’s endorsement adds weight to a trade that has already rewarded investors who leaned in early this year.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error