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Scotiabank Maintain 3.75 USDPEN Forecast

PERU
  • In their latest update, Scotiabank continue to see USDPEN fluctuating around 3.75 this year, within a 3.69-3.81 range. This compares with the latest 3.72 year-end consensus on Bloomberg and 3.79 in the latest BCRP survey. Scotiabank’s expectations for a weaker USD in 2024, as the US economy slows, biases the FX rate downwards in their view, while higher copper and steady gold prices would contribute to the stability of the FX rate.
  • They note upside risks to the FX rate arising from recent pressures on the country’s fiscal position, highlighting contingent liabilities, such as that linked to PetroPerú, and the negative outlook on the credit rating from rating agencies. They note that a downgrade would give an upward bias to the FX rate, as would a reduction in the interest rate differential with the US.
  • In their opinion, the relationship between the FX rate and the trade balance (which should pressure the FX downwards in the medium-term) has weakened due to political uncertainty since 2021. They also do not expect a big impact from El Nino this year, given indications that this is now weakening.
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