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The Mexican Peso could recover to the 17.00s against the US Dollar, according to analysts, as election risk eases.  Mexico’s high interest rates are likely to be the driver as they draw foreign investors seeking returns.  USD/MXN continues pulling back in the midst of a short and medium-term uptrend.  The Mexican Peso (MXN) trades within a narrow range on Wednesday as market calm descends and the post-election volatility, which saw the Peso sell-off by over 10% in its key pairs, eases.  Several market analysts are now saying the Mexican Peso will drift higher as firm fundamentals and a carry-trade advantage counteract the damage caused by the recent politically-driven volatility.   At the time of writing, a single US Dollar (USD) buys 18.43 Mexican Pesos, EUR/MXN is trading at 19.82 and GBP/MXN at 23.47. Mexican Peso to regain strength, say analysts The Mexican Peso is likely to recover after its deep decline after the elections, according to analysts at Rabobank, who forecast USD/MXN rebounding to a base case target of 18.10, but possibly even lower, over the next month.  “We see USD/MXN trending back down to the 17.80 region with the potential for a move as low as 17.20 if vols subdue, though we think a return below 17.00 is unlikely,” said the bank in a note on Wednesday.  The Peso still has a big “carry” advantage over rivals, says Rabobank, due to the high interest rates in Mexico. This factor is likely to keep demand relatively high.  “MXN remains the most attractive carry currency in the world when adjusting for volatility and liquidity, despite the recent surge in vols,” says the note. The carry trade is a type of strategy in which investors borrow in a currency where interest rates are low – such as Japanese Yen (Apr. of circa 0.0% – 0.1%) and…

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Filed under: News - @ June 19, 2024 10:12 pm