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Scotiabank Economics Management indicated that he had reviewed his projection of exchange rate from S / 3.26 to S / 3.34 for 2018 and from S / 3.22 to S / 3.30 by 2019.
"We hope that the exchange rate end of 2018 in S / .3.34. This is a significant change from our previous S / 3.26. The foundations of the Sun (PEN) have not changed much. What has changed is the strength of the dollar (US $) and the technical figure of the PEN ", explains in his weekly report Mario Guerrero, management economist.
In this respect, the entity explains that the exchange rate corrected from its previous maximum of S / 389, still located in a bullish channel limited between S / 3772 and S / 3886.
"The steep slope with which the exchange rate It was up between mid-September (S / 3.28) and mid-November (S / 3.389), it was broken. This could be a first sign of burnout, "says Scotiabank.
In this regard, the entity states that, technically, it will be necessary to see falls below 3.37 S / S to project a larger correction of up to S / 3.34.
"This is our favorite scenario for the end of the year, as if the dollar strengthens temporarily, it trades around 97 points on the DXY index (which compares the dollar daily with other currencies in the world). ), significant resistance of this index to 97.8 points (61.8% on the Fibonacci scale), "he said.
As well, metal prices they recover, with the price of gold above the psychological level of $ 1,200 and setting up a bullish channel between $ 1,210 and $ 1,250; and the copper price in a channel between 2.80 USD and 2.90 USD, above the technical support of 2.70 USD.
Scotiabank explains that, although one of the sources of uncertainty has dissipated recently with the approval of the agreement on Brexit by the leaders of European Union, the meeting of G-20 this weekend where it is possible to reach an agreement between USA and China in regards to commercial war. "If this event materializes, our favorite scenario would be more likely."
However, a setback in the meeting of G-20 put pressure on emerging currencies, mainly the yuan, which could exceed the psychological ceiling of 7 yuan to the dollar (now at 6.94), thus leading to exchange rate local above the historical average of S / 3.40. This should be accompanied by a DXY above 98 points and a sharp fall in the price of metals
the technical levels indicated.
HOW DO WE ARRIVE HERE?
Scenarios for financial markets and for the global economy They changed, explains the bank. This has maintained the projections of Scotiabank in a state of constant stress, prices of commodities and bags ranging from historic highs to the sharpest declines of the same year.
"We started 2018 with a scenario in which the currencies of the region appreciated and the markets were moving towards another good year.In late January, the US, European and emerging markets had reached record highs", he declared. entity.
At that time, the dollar weakening and the Central Reserve Bank (BCR) even bought dollars in the spot market (US $ 184 million) at SEK 3.21 to avoid a higher capital gain, which was a favorable context for the projection of Scotiabank S / 3.18 in effect from September 2017.
The local political noise between February and March, with the resignation of President Pedro Pablo Kuczynski (PPK) and taking charge at the bar of President Martín Vizcarra he only caused "exchange rate", Points out the entity.These facts caused the exchange rate to reach S / 3.27 and return in mid-April to S / 3.22 once the credit rating agencies maintained their credit ratings for Peru, reflecting thus good economic fundamentals despite the local political noise.
The recovery from S / 3.22 to S / 3.29 between late April and mid-May marked the beginning of the impact of the commercial war, resulting in a sharp decline in metal pricesmainly copper and gold in the case of Peru and an overreaction of dollar, which has led it to strengthen beyond what is suggested by the DXY index, which has appreciated more vis-à-vis emerging currencies, indicates Scotiabank.
"Markets have quickly assimilated the first expectations of this commercial conflict, bringing with it to China's stock markets, metal prices and types of change in emerging economies. The exchange rate He approached S / 3.30, a level considered at the time as a significant psychological ceiling, activating the supply of dollars on the professional market ".
This level only managed to be exceeded by mid-August, with the outbreak of the crisis in Turkey. The turbulence of Emerging Markets kept in focus the projection of Scotiabank. "However, it is not the fundamentals of the Sun that have changed, but the volatility of the dollar."
The BCR he even announced that he did not foresee any significant impact on Peru, partly because of the good basics of the Peruvian economy (high level of international reserves and low current account deficit).
However, the temporary strengthening of the dollar and the significant drop in metal prices led to Scotiabank look at your exchange rate projection. Not in terms of direction, as Peru's economic fundamentals remained favorable; but in terms of magnitude, we took our projection at 3.22 S / A as a first adjustment, although the risk that the period of turbulence is sustained predisposes to the new adjustments.
This risk materialized in September with the shockwave of the crisis of Turkey sure Argentinaand electoral circumstances in Mexico and Brazilwhich ultimately fueled investors' risk aversion, especially towards emerging markets.
The exchange rate exceeded its psychological ceiling of S / 3.30 and reached S / 3.34, along with a strengthening of the dollar (the DXY index exceeded its technical resistance of 95 points and reached 97 points), the price of copper falling to $ 2.56 (technical support of $ 2.70) and a gold price of up to $ 1,184 per ounce (less than its psychological strength of $ 1,200). At that time, Scotiabank the range S / 3.29 to S / 3.32 was considered the most likely in the short term.
But episodes of turbulence continued with the outbreak of the crisis in Italy, which caused the exchange rate to exceed the level of S / 3.34 (previous maximum), as well as fears of a
The Brexit agreement pushed the exchange rate to S / 3.39 in mid-November, which is very close to the historical technical level of S / 3.40.
What to expect for the exchange rate for 2019?
"We are waiting for a exchange rate 3.30 by the end of 2019. The bias of our projection is now downward. […] Peru's economic fundamentals for 2019 should help correct the excessive exchange rate reaction observed in 2018, "said the GEE of Scotiabank.
The international scenario for 2019 is more difficult to visualize. The effects of the trade war on the economic slowdown and the prices of metals must be taken into account; the degree of risk aversion, mainly to China and emerging economies; and in a general context the monetary normalization by
a part of the Federal Reserve (EDF).
Scotiabank's baseline scenario forecasts global economic growth of 3.7% and includes a moderate impact of the trade war with the United States. deceleration at a rate of 2.4%.
In this context, the EDF It would continue its monetary normalization process, even if, given the context of global slowdown, probably with a number of rate hikes lower than expected by the market (two rises instead of three), warns the entity.
This would lead to a weakening of the dollar as futures positions record marginal increases, a typical behavior prior to the change in trend.
"The local political noise could continue to generate" hiccups ", but without changing the fund's direction, this scenario is compatible with an exchange rate of 3.33.30 by the end of 2019", stresses the bank.
It also indicates that it's about his favorite scenario, but that other scenarios are almost equally likely. given the high volatility
currently characterizes the financial markets. The balance of risks necessarily implies the consequences of the trade war between the United States and China. "These could not only cause a
global slowdown stronger than expected, but stokes investors' risk aversion and the contraction of capital flows to emerging economies.
A catalyst for this scenario would be a depreciation of the yuan, whose impact would be material in emerging markets, leading to exchange rate above S / 3.40. 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, stresses the entity, the participation of BCR. The issuing entity has accompanied the upward trend of the exchange rate, facilitating the process of currency hedging through the placement of CDRs and foreign exchange swaps.
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