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The exchange rate it would close in 2019 at S / 3.30, above the initial Scotiabank projection (S / 3.22), but with a downward bias relative to the current price.
"Basically, we are maintaining a similar appreciation applied to a higher base, and the technical market numbers and fundamentals present risks," said Mario Guerrero, Senior Analyst, Economics Department, Scotiabank.
He explained that Peru's economic fundamentals for 2019 (economic growth of 4%, inflation of 2.5%, budget deficit of 2% of GDP, current account deficit of 2.2% of GDP, level of stable international reserves ) should help correct the overreaction of exchange rate seen in 2018
He said the international scenario for 2019 is harder to visualize. It must take into account the effects of commercial war economic slowdown and metal prices; the degree of risk aversion, mainly to China and emerging economies; and in a general context, the Fed's monetary normalization (which has already been widely anticipated by the markets).
"Our baseline scenario takes into account a growth of the global economy of 3.7% according to our global team, and includes a moderate impact of the trade war, the United States slowing at a rate of 2.4% ", he said in the Bank's Weekly Report. .
In this context, the Federal Reserve would continue its monetary normalization process, although, in a context of global slowdown, with probably a lower number of rate increases than expected by the market (two increases instead of three).
Recent concerns by Fed officials about global growth in 2019 make this scenario likely.
This would result in a weakening of the dollar (falling below the 95 points of the DXY index), since futures positions are recording marginal increases, a typical behavior prior to the change in trend.
"The rate hike and the weak dollar would reinforce our projection of the gold price of $ 1,300 per ounce. China it would grow at a rate of 6.2% on the basis of expansive monetary and fiscal measures that would help counteract the negative impact of rising tariffs and support our copper price forecast of US $ 3 per barrel. average book, "he said.
The recovery of the futures markets, which are now over-sold, is a key factor in the evolution of metal prices.
The local political noise could continue to generate "hiccups", but without changing the direction of the bottom. This scenario is compatible with an exchange rate of S / 3.30 by the end of 2019.
"This is our preferred scenario, but other scenarios are almost equally likely given the current high volatility in the financial markets." The balance of risks necessarily implies the consequences of the US-Canada trade war. China, "he said.
According to Guerrero, these factors could not only lead to a stronger global deceleration than expected, but also to risk aversion among investors and, as a result, a contraction of capital flows to emerging economies.
A catalyst in this scenario would be a depreciation of the yuan, the impact of which would be material in emerging markets, resulting in an exchange rate of over 3.40 s.
This scenario would be compatible with intense local political noise, such as the closing of the Congress or the progress of the elections. In this case, it will be necessary to make decisions with caution and with the corresponding currency hedges.
In this context, the participation of the Central Reserve Bank (BCR) will be essential. The issuing entity has accompanied the upward trend of the exchange rate, thus facilitating the process of currency hedging through the placement of CDRs and foreign exchange swaps.
One of the reasons for the lack of direct interventions (cash sales) is that, until September of this year, the exchange rate volatility was lower than that recorded in 2017. Another reason is that the wave of depreciation is widespread among emerging economies. Another context is that the real exchange rate does not show a marked misalignment.
Moreover, it should be noted that, despite the increase in risk aversion, the holding of sovereign bonds by foreign investors remains above 40%.
Far from liquidating their positions, these investors have chosen to hedge their positions. This increased demand for hedges has increased its price, but to a moderate extent.
This confidence is also reflected in the fact that, although all emerging currencies are depreciating, the Peruvian soil is doing so at a lower intensity, remaining the most stable currency in Latin America.
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