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14 May 2015
USD/MXN keeps the neutral stance near term – JP Morgan
FXStreet (Edinburgh) - In the opinion of analysts at JP Morgan, the outlook for the Mexican peso remains neutral for the time being.
Key Quotes
“Short-term valuation models suggest the USD/MXN is tad below its fair level to coincidental risk metrics after US payrolls (fair levels in a 15.17-15.38 range)”.
“Importantly, we do believe that MXN offers value in medium-term (we forecast USD/MXN at 14.9 by December 2015)”.
“However, we refrain from long MXN risk at the current juncture, given that the MXN has the most stable and one of the highest betas to global bond yields in Latin America which tilts the risks to a higher USD/MXN in case of further increases in global bond yields”.
“Of note, in such scenarios, Banxico is likely to step up intervention by increasing both the conditional and unconditional auction sizes. However, we expect the step-up in FX intervention to occur at higher spot levels than before (recall that the unconditional $52mn daily auction was announced when the USD/MXN was trading at 15.602)”.
“We remain neutral MXN at the current juncture”.
Key Quotes
“Short-term valuation models suggest the USD/MXN is tad below its fair level to coincidental risk metrics after US payrolls (fair levels in a 15.17-15.38 range)”.
“Importantly, we do believe that MXN offers value in medium-term (we forecast USD/MXN at 14.9 by December 2015)”.
“However, we refrain from long MXN risk at the current juncture, given that the MXN has the most stable and one of the highest betas to global bond yields in Latin America which tilts the risks to a higher USD/MXN in case of further increases in global bond yields”.
“Of note, in such scenarios, Banxico is likely to step up intervention by increasing both the conditional and unconditional auction sizes. However, we expect the step-up in FX intervention to occur at higher spot levels than before (recall that the unconditional $52mn daily auction was announced when the USD/MXN was trading at 15.602)”.
“We remain neutral MXN at the current juncture”.