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PERU: BBVA Enters Long PEN Position

PERU
PeruEM BulletBulletGlobalEmerging Market NewsRegion
  • USDPEN rose above the 3.80 level yesterday, closing 0.41% higher at 3.8104. With the pair appearing to meet some resistance as it moves into their target short USDPEN range of 3.80-3.85, BBVA has entered a long PEN position, with a target of 3.68 and a stop of 3.91.
  • They note that offshore positioning remains extremely stretched, while net USDPEN exposure from local banks has been shifting notably back towards short USDPEN. While they expect risk assets to trade with some headwinds, they see the PEN as a safer haven in the region.
  • Meanwhile, implied real policy rates remain elevated, with headline inflation at target. They also believe that the BCRP is nearing the end of its cutting cycle, after noting that it sees the real policy rate ex-ante as being close to neutral. BBVA says that this is likely to add support for the PEN towards and through the start of 1Q25. In addition, the BCRP is likely to provide some USD liquidity should the currency start to reach the mid to upper 3.80s.
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  • USDPEN rose above the 3.80 level yesterday, closing 0.41% higher at 3.8104. With the pair appearing to meet some resistance as it moves into their target short USDPEN range of 3.80-3.85, BBVA has entered a long PEN position, with a target of 3.68 and a stop of 3.91.
  • They note that offshore positioning remains extremely stretched, while net USDPEN exposure from local banks has been shifting notably back towards short USDPEN. While they expect risk assets to trade with some headwinds, they see the PEN as a safer haven in the region.
  • Meanwhile, implied real policy rates remain elevated, with headline inflation at target. They also believe that the BCRP is nearing the end of its cutting cycle, after noting that it sees the real policy rate ex-ante as being close to neutral. BBVA says that this is likely to add support for the PEN towards and through the start of 1Q25. In addition, the BCRP is likely to provide some USD liquidity should the currency start to reach the mid to upper 3.80s.