Back
8 Sep 2015
Bearish scenario for the Colombian peso – BAML
FXStreet (Edinburgh) - In the view of Analyst at BAML Ezequiel Aguirre, the prospects for the Colombian currency lean towards the bearish side.
Key Quotes
“The further decline in oil prices observed over the past month makes a difficult adjustment even more difficult. The Colombian government derives 3.8% of GDP (22.5% of its revenues) from oil”.
“At our current 2015 oil forecast of $58, this declines to 2.5% of GDP; at $40, it falls further to 1.1% of GDP”.
“MXN/COP forwards for investors. We forecast COP to end this year at 3300, above forwards”.
“We also see Banrep as likely to appeal to FX intervention rather than rate hikes in order to deal with currency weakness. Between 2012 and 2014, Banrep accumulated $14.8bn in reserves under high oil prices using the argument that doing so was a way to purchase insurance. $40 oil appears to be reason enough to start using that insurance”.
Key Quotes
“The further decline in oil prices observed over the past month makes a difficult adjustment even more difficult. The Colombian government derives 3.8% of GDP (22.5% of its revenues) from oil”.
“At our current 2015 oil forecast of $58, this declines to 2.5% of GDP; at $40, it falls further to 1.1% of GDP”.
“MXN/COP forwards for investors. We forecast COP to end this year at 3300, above forwards”.
“We also see Banrep as likely to appeal to FX intervention rather than rate hikes in order to deal with currency weakness. Between 2012 and 2014, Banrep accumulated $14.8bn in reserves under high oil prices using the argument that doing so was a way to purchase insurance. $40 oil appears to be reason enough to start using that insurance”.