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HSBC See USDPEN Steady At 3.70 Year-End, Supported By Further BCRP Intervention

PERU
  • HSBC note that lower local rates, USD strength, and local political stresses saw PEN underperform at the start of the year, prompting BCRP to sell dollars in the spot market again in February, for the first time since October. BCRP has also continued to intervene in the forward market. HSBC estimate that total intervention in February via both methods to be over $1.5bn.
  • Going forward, HSBC expect BCRP to continue cutting rates at a 25bp pace throughout the year to support the economy as inflation eases, while also defending PEN. Once the Fed starts cutting, pressure on PEN should ease, but in the meantime, they expect PEN to find sufficient support from BCRP, as well as from Peru’s relatively strong external account position.
  • HSBC remain comfortable with a neutral outlook for USDPEN over the medium term, maintaining a 3.70 year-end forecast for the pair.
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