He adds: “However, the relative deterioration in the growth prospects of USA versus the rest of the countries, together with the stability in interest rates, recently generated a pause in the rate of appreciation of the American currency”.
Balanz explains that “the DXY index, which measures the evolution of the dollar against a basket of currencies from developed countries, remained practically unchanged in the last month, something that was correlated with stability in the main currencies of developed markets, such as the euro, pound sterling and Japanese yen”.
The dollar in emerging markets
“The stability in the dollar and a slower rate of depreciation in the yuan contributed to the stability in emerging market currencies. As a whole, emerging market currencies showed an appreciation of 1.3% in the last month, helped mainly by the appreciation of currencies in Latin America In Asia, the average depreciation of currencies was 0.8%, among which the movement of the yuan stood out (2.1%) On the EMEA side, although currencies showed an average depreciation of 2.2%, presented a high degree of heterogeneity, since the Turkish lira depreciated 10.5%, while the Polish zloty appreciated 2.7%”, he maintains.
The dollar in Latin America
The report indicates that unlike the other regions, Latin American currencies exhibited a coordinated appreciation. As a whole, the currencies of the region captured by the JP Morgan LACI index accumulated an appreciation of 2.7% in the last month, outperforming the performance of emerging currencies. The Peruvian sol and the Brazilian real were the most benefited in the recent appreciation as they showed movements of -3.6% and -3.5%, respectively.
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On the other hand, he affirms that “the uncertainty regarding Sunday’s elections in Colombia kept the peso practically at the same level as that observed at the end of April. Although the latest polls have been showing the growth of candidates outside of Gustavo Petro and Federico Gutiérrez, the base scenario continues to be a second round between the two on June 19.”
What’s going to happen with the dollar
Regarding what could happen with the price of the dollar, Balanz leaves his forecast: “The loss of relative dynamism of the United States economy together with the stability in interest rates should take pressure off the dollar. As we pointed out in previous sections, the key for stability in interest rates in the United States will come hand in hand with a sustained inflationary convergence In the short term, the signs point to less relative pressure on the US dollar In addition, if it is confirmed that the worst of the situation in China behind us, emerging market currencies should enjoy a more benign environment, at least in the short term.”
Source: Ambito
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