Economy

Vaccine could improve Latin America's currencies: Bloomberg

Mexico and Chile currencies may rise due to the COVID-19 vaccines, emerging stronger than their peers

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  • Chile and Mexico have secured more of the vaccines than their emerging-market peers;
  • Gains in the Mexican peso may also be limited after the recent rally left it with a neutral valuation.

The COVID-19 vaccines that have been applied in Mexico and Chile may be on their way to reviving these Latin American currencies, according to a Bloomberg study of 12 emerging-market currencies measuring lockdown rates against vaccine coverage and relative valuations.

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Latin American currencies took a heavy hit during the coronavirus crisis and the gradual weakening of the dollar since March has failed to reverse the damage, according to Bloomberg. Now, Chile and Mexico have secured more of the vaccines than their emerging-market peers, such as Brazil, after imposing some of the strictest lockdowns. That is fueling optimism for an economic revival, said Bloomberg.

READ ALSO: Argentina softens currency rules about dollar-denominated card purchases

“Latin America is in a good position because the reopening has just started and there is more to go,” said Pierre-Yves Bareau, who oversees more than $49 billion as chief investment officer for emerging-market debt at JPMorgan Asset Management in London.

According to him, the impact of the vaccine is also more important compared with markets that have handled the virus better such as Asia, reported Bloomberg.

READ ALSO: Brazil’s currency is the worst-performing one of 2020, says Valor

According to the media outlet, gains in the Mexican peso may also be limited after the recent rally left it with a neutral valuation, with a real effective exchange rate of 0.4% above the five-year average. Meanwhile, the Chilean peso is undervalued by 5.6%.

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