Latin America’s Currencies Are Back From the Brink of Collapse

(Bloomberg) -- Say it very quietly, but the worst may be over for Latin American foreign-exchange markets.

Currencies in Brazil, Chile and Colombia are paring losses in December after falling to record lows last month as a wave of violent protests threatened to depress already sluggish growth in the region.

Chile’s peso is up 3.3%, Colombia’s peso climbed 1.8% and Brazil’s real gained 0.5% in the first four days of the month. It may not sound like much, but it’s Chile’s longest winning streak since June and Colombia’s since September. Central bank intervention in Chile and Brazil has played a big role, while Colombia is breathing a sigh of relief after protests didn’t spiral out of control as many feared.

“People are moving away from being worried about what’s happening on the ground and toward fundamentals,” said Alvaro Vivanco, head of Latin America strategy at NatWest markets in Stamford, Connecticut. “It’s a combination of everything, and of sentiment turning a little bit on the region.”

Of course, not every currency is putting its troubles behind it. Argentina’s peso remains near a record low amid strict currency controls as Alberto Fernandez prepares to be sworn in as president on Dec. 10.

“There is scope for Latam FX to continue to rally to close this gap” between the rest of developing-nation currencies, which outperformed the region in November, said Ilya Gofshteyn, senior EM macro strategist at Standard Chartered Bank in New York. “Lower liquidity into year-end creates unfavourable seasonal dynamics, but I would expect BRL, MXN, COP, and CLP to all start 2020 on a stronger note.”

To contact the reporters on this story: Philip Sanders in Santiago at psanders@bloomberg.net;Sydney Maki in New York at smaki8@bloomberg.net

To contact the editors responsible for this story: Carolina Wilson at cwilson166@bloomberg.net, Philip Sanders

©2019 Bloomberg L.P.