BNY flags rising volatility and steady central bank policies as primary threats to the carry appeal of the Brazilian real and Mexican peso, warning of potential depreciation risks.
BNY flags rising realized volatility and G10 rates drifting higher, which threatens Latin American carry trades. With Brazil's central bank seen on hold and terms-of-trade support lacking, the real's carry appeal weakens, raising depreciation risk.
Rising realized volatility and G10 rates drifting higher can unwind carry trades, while Brazil's central bank is seen on hold and terms-of-trade support is lacking.
The article says Brazil's central bank is seen on hold.
BNY warns that rising realized volatility and higher G10 rates expose Latin American carry trades. Mexico's central bank is seen on hold and terms-of-trade support is absent, so the peso's real-rate advantage depends on policy, leaving it vulnerable to carry unwinds.
Rising realized volatility and higher G10 rates can trigger carry-trade unwinds, and Mexico's central bank is seen on hold with terms-of-trade support lacking.
The article says Mexico's central bank is seen on hold.
BNY strategist Geoff Yu warns that Latin American currencies, specifically the Brazilian real and Mexican peso, face mounting pressure as realized volatility rises. With central banks in both nations expected to hold rates steady, the lack of terms-of-trade support leaves these carry trades vulnerable to a broader unwind as G10 interest rates drift higher.
Rising realized volatility and higher G10 interest rates are eroding the carry-trade appeal of these currencies, compounded by a lack of terms-of-trade support.
No, current market expectations suggest that both the Brazilian and Mexican central banks will remain on hold.