LATAM Currencies Ride the Wave of Chinese Economy Reopening

Latin American currencies have gained strenght against the US dollar over the past week, with investors continuing to bet on the region’s major economies cutting interest rates in response to rising commodity prices.

The Mexican peso increased its value by more than 5% during the first two months of the year. Today, a US dollar buys around 18 Mexican pesos, nearly a 5-year high. The reason for this may be Mexico’s free trade alliance with the United States and Canada.

The Brazilian real jumped by more than 1% against the greenback in a single day last week. Investors are attracted by Brazil’s plan to create an EU-style regional currency in Latin America.

Global investors have returned to Latin America’s capital markets in anticipation of a surge in demand for commodities as China reopens its economy after years of travel restrictions due to the COVID-19 pandemic.

Investors also expect central banks to cut interest rates as inflation falls in the region’s major economies.

The Colombian peso is one of the few regional currencies that haven’t managed to gain traction. Market observers see serious concern among investors regarding President Gustavo Petro’s recent proposals for social and economic reform.