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8 May 2015
Peruvian peso remains bearish – BAML
FXStreet (Edinburgh) - The outlook for the Peruvian currency remains on the negative side, according to analysts at BAML.
Key Quotes
“We continue to expect the Central Reserve Bank of Peru (BCRP) to loosen monetary policy further as a reaction to the economy’s slow growth”.
“Nevertheless, its space for further loosening is limited by above-target inflation and currency mismatches in the private sector”.
“Despite the imposition of strong reserve requirements on loans in foreign currency, dollar loans continue to account for 38% of total private sector liabilities with the banking sector, as opposed to only 32% of liquidity”.
“We stay bearish on the Peruvian sol. We expect PEN to weaken to 3.25 by the end of 2015, with risks of an even larger depreciation”.
“Lower long-run economic growth potential, declining terms of trade and persistent current account deficits will keep putting pressure on the currency, which is still about 10% overvalued. We recommend short PEN/MXN”.
Key Quotes
“We continue to expect the Central Reserve Bank of Peru (BCRP) to loosen monetary policy further as a reaction to the economy’s slow growth”.
“Nevertheless, its space for further loosening is limited by above-target inflation and currency mismatches in the private sector”.
“Despite the imposition of strong reserve requirements on loans in foreign currency, dollar loans continue to account for 38% of total private sector liabilities with the banking sector, as opposed to only 32% of liquidity”.
“We stay bearish on the Peruvian sol. We expect PEN to weaken to 3.25 by the end of 2015, with risks of an even larger depreciation”.
“Lower long-run economic growth potential, declining terms of trade and persistent current account deficits will keep putting pressure on the currency, which is still about 10% overvalued. We recommend short PEN/MXN”.