Latin America: Scrubbing Up for Major Intervention

- "Ample global liquidity coupled with improved regional fundamentals, particularly higher commodity prices, should lead to further appreciation of LatAm exchange rates against the US dollar. We do not expect any depreciation in the major currencies (BRL, CLP, MXN and COP) against the USD in the next three months. In fact, we have changed our USD/BRL forecast for year-end 2010 to 1.72 from 1.80"
- "Global interest rates should remain at their current low levels for an extended period of time. This environment tends to support commodity prices, thus favoring terms of trade in Latin American countries. Increases in commodity prices amid reductions in risk aversion, which are part of the same phenomenon, have led to increased capital inflows into many Latin American countries."
- "The direct link between commodity prices and terms of trade lies in the large share of commodities in Latam exports. The weight of commodity exports in Latam countries ranges from 18% (in Mexico) to 95% (in Venezuela) of total exports, highlighting the great significance of those prices on exports dynamics."
- "Against this backdrop, we believe pressures for additional Central Bank intervention, in the form of dollar purchases in both spot and forward markets as well as capital controls, are likely to gain momentum."


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