The Mexican peso could close 2023 at 19.00 vs the U.S. dollar, Barclays analysts said on Friday, October 28th, citing well-financed public accounts, appropriate actions taken by the country’s central bank, and benefits from nearshoring.
The peso-dollar exchange rate would ease by 4.15% from its current levels if the forecast is met.
“Fiscal austerity, Mexico’s attractiveness for nearshoring and a shrinking investment universe, as Russia is no longer an option and Chinese politics are posing worries, are factors making Mexico look like candy,” Gabriel Casillas, Barclays’ chief economist for Latin America, said at a news conference.
Barclay’s forecast paints a more optimistic scenario for the emerging-market currency after a Moody’s analyst predicted a 20% depreciation spread through late 2022 and 2023 and even into 2024.
Asked about the Moody’s prediction of a coming correction, Barclays analyst Erick Martinez noted his “clear disagreement” with it.
Martinez noted the Mexican peso could experience episodes of volatility if economic troubles deepen at the beginning of 2023, but would regain attractive levels as central banks ease their monetary policies.
“The dollar is overvalued precisely because the U.S. Federal Reserve’s monetary policy is very restrictive,” he added. “As it relaxes, the dollar will return to its fair value. I don’t see the dollar becoming stronger in a context of a crisis in the United States.”
Barclays also projected Mexico’s economic growth for 2023 at 0.9%, down from the 2.5% expected for 2022, following a possible global economic recession during the first two quarters of 2023.
The firm noted Mexico will experience no growth during the first quarter of 2023 and will hit a negative 0.1% advance during the second quarter.
Barclays is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services.