FX Talking
Latam FX Talking: Resources and politics
Washington's move on Venezuela has not had much of a lasting impact on Latam currencies. High yields remain very much in favour in Brazil and, to a lesser degree, in Mexico. The copper story and a more market-friendly government are also doing wonders for Chile's peso. We favour Latam outperformance of the forwards, but probably lower nominal gains
Main ING Latam FX Forecasts
| USD/BRL | USD/MXN | USD/CLP | ||||
| 1M | 5.45 | ↑ | 18.25 | ↑ | 915 | ↑ |
| 3M | 5.50 | ↑ | 18.25 | ↑ | 925 | ↑ |
| 6M | 5.50 | ↓ | 18.00 | ↓ | 900 | ↑ |
| 12M | 5.50 | ↓ | 17.50 | ↓ | 850 | ↓ |
USD/BRL: A big year for the real
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/BRL
5.37
|
Mildly Bullish | 5.45 | 5.50 | 5.50 | 5.50 |
- Seasonal strength of the dollar may keep USD/BRL supported in 1Q, but then there’s a chance for lower levels through the year. The bull case for Brazil’s real is the 13% implied yield and potentially strong inflows into its bond markets as the central bank starts to cut. The policy rate is expected to be cut from 15.00% to 12.50% this year. Also, any broad flows into EM local currency bonds should help BRL given Brazil’s 7% weight in key benchmarks.
- The big story, however, will be the October election. President Lula comfortably leads Flavio Bolsonaro in the polls, but any fiscal giveaways pre-election could easily hit the real.
- Consensus sees 5.40/5.50 for USD/BRL this year. We agree, but tend to see greater risks to the downside on a positive EM story.
Source: Refinitiv, ING forecasts
USD/MXN: Riding out the storm
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/MXN
17.92
|
Mildly Bullish | 18.25 | 18.25 | 18.00 | 17.50 |
- The peso fared well in the face of the Venezuela news and also to US threats of direct attacks on the drugs cartel on mainland Mexico. Perhaps it is because these threats have been made for a couple of years now. GDP growth is expected to pick up to around 1.3% from 0.5% last year and it looks like Banxico has nearly finished its easing cycle at 7.00%.
- But the peso still offers a 7% implied yield and the Latam region is still favoured for commodities – though Mexico is an energy story rather than the metals/softs exposure among its neighbours.
- We like EMFX this year, but the main risk for the MXN is July’s renegotiation of the USMCA, where the US could try to extract more.
Source: Refinitiv, ING forecasts
USD/CLP: Copper and Kast drive peso gains
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/CLP
885.00
|
Mildly Bullish | 915.00 | 925.00 | 900.00 | 850.00 |
- The peso has surprised a lot of people by breaking under 900/USD. However, there have been two big positives: i) the huge rally in copper and ii) the market-friendly Jose Antonio Kast winning December’s presidential election in a landslide. The latter may now have a greater bearing given recent geopolitical developments, with Chile now falling on the Right side of Trump’s political tracks.
- One question now is what does the central bank do with its FX intervention policy? Does it buy more down here to replenish FX reserves and improve sovereign credit ratings?
- Terms of trade have surged with the copper story and assuming 4% growth plans can be delivered, CLP gains look sustainable.
Source: Refinitiv, ING forecasts
Content Disclaimer
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Download
Download articleThis article is part of the following bundle
14 January 2026
FX Talking: Choppy waters, Teflon dollar This bundle contains 6 Articles