LatAm currencies enter uncharted waters in 2017 under Trump: Reuters poll

By Silvio Cascione


BRASILIA (Reuters) - Latin American currencies are set for another choppy year in 2017, a Reuters poll showed on Friday, with strategists still scrambling to gauge the impact of Donald Trump's presidency in the United States.


The survey suggested all major Latin American currencies would probably weaken this year, with the Mexican peso constantly flirting with new lows and the Brazilian real giving back part of 2016's massive gains. <MXN=> <BRL=>


The extent of the drops seemed highly uncertain, however, as investors still await details on Trump's policies. Trump, who takes office on Jan. 20, has pledged to erect a border wall with Mexico and impose higher trade tariffs.


His proposals to spur growth through fiscal policies are also expected to lead to higher U.S. interest rates, which would in turn reduce the allure of Latin American currencies.

"Clearly, any forecast for the peso has to be given a wide berth for potential swings in either direction, given that U.S. trade policy is now up in the air," CIBC economists wrote.

The median estimate for the Mexican peso at the end of 2017 stood at 21.5 per dollar, the poll showed. The 26 forecasts were collected from Tuesday through Thursday, considering a reference rate of 20.73 for the peso, its closing level on Monday.

The range of forecasts was the widest since the poll's current format was introduced five years ago. Most estimates ranged between 18.55 and 23.50, but one strategist, from Nomura, projected the peso at 28 in December.

Mexico's central bank has fueled some uncertainty, having tried to fight speculators on Thursday by selling at least $1 billion in a surprise intervention.

Some have wondered whether investors are overstating the U.S. president-elect's potential impact.

"Trump's margin of maneuver is not so high, so the possibility of a super dollar is low," said Catalina Tobón, head of strategy and research at Old Mutual in Colombia.

Elsewhere in Latin America, strategists expect the Argentine peso to weaken 11 percent to 18 per dollar by year-end and the Colombian peso to lose 5 percent to trade at 3150 per dollar.

The poll showed Brazil's real weakening 6 percent to 3.49 per dollar as the central bank is expected to step up the pace of interest rate cuts to fight the nation's recession. But the forecasts also remained spread across a wide range, varying between 3.0 and 3.9 per dollar for the end of the year.

Even though the real has strengthened to nearly two-month highs this week, forecasts remained broadly unchanged from a December poll in a sign that the rally of the past few days will probably be short-lived.

(Additional reporting by Miguel Gutierrez in Mexico City, Hernan Nessi in Buenos Aires, Nelson Bocanegra in Bogota, Ursula Scollo in Lima and Anthony Esposito in Santiago; Editing by Ross Finley and Lisa Von Ahn)

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