Bank Of America Look For Hedges In LatAm FX, Favour Long USD/MXN

Late Monday saw Bank of America Research note that FX is not
reflecting the true extent of the econ & fiscal deterioration of COVID-19.
The late-spring rally has followed global risk assets, which suggests it is
largely driven by extremely expansive global liquidity conditions/reliance
on the Fed put. Nevertheless, we think that, the more the markets rally,
the more out of the money the Fed put is, so we foresee less space for a
liquidity driven rally in LatAm FX... We like these levels to put hedges for
a potential market correction in summer. After all, the virus is still on the
loose, the economic & fiscal deterioration will be steep, political noise
is arising across the continent, and the US election could alter the mood
of global markets. Hence, we like to be long USD with the most liquid and
high beta currencies. In particular, we like being long USD/MXN. We think
that a weak peso is necessary for the recovery in the absence of any
meaningful fiscal stimulus during the pandemic given the importance of
Mexico's manufacturing exports as a driver of growth."