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Morgan Stanley Exit Short USDMXN, LatAm FX Positioning May Be Stretched

LATAM FX
  • According to strategists at the bank, MS turn neutral from overweight on Latin American currencies in light of the recent rally.
  • Cite risk/reward being less compelling at current levels, particularly for MXN and COP.
  • Exit short USDMXN as risks increase. Potential for reaction from US regarding the recent excess USD bill being voted through the senate could increase Peso's risk premium.
  • Maintains USDBRL short on strong economic momentum and central bank rhetoric.
  • Continues to favour CLP and PEN, which should benefit from continued economic growth in Asia.

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