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(Bloomberg) – Vaccines against Covid-19 could change the fate of two Latin American currencies.
The Mexican and Chilean pesos are in pole position to rally when vaccines are finally distributed, according to a Bloomberg study of 12 emerging market currencies, which measured pandemic lockout rates relative to vaccine coverage and relative valuations. .
In general, Latin American currencies were affected by the pandemic and the gradual weakening of the dollar since March has not been able to reverse the impact. Now Chile and Mexico have secured more vaccines than their emerging market peers, after imposing some of the toughest lockdown measures. This scenario increases the optimism of the recovery of the economy.
“Latin America is in a good position because the reopening has just begun and there is more to come,” said Pierre-Yves Bareau, who manages more than $ 49 billion as chief investment officer for emerging markets debt at JPMorgan Asset Management. , in London. “The impact of the vaccine is also more important compared to the markets that have fought the virus better, such as Asia.”
Chile approved the use of the Pfizer-BioNTech vaccine last week and is expected to begin delivering doses in the next few days. Mexico will begin vaccination on Thursday, said Vice Minister of Health Hugo López-Gatell.
Still, there is no guarantee how quickly all vaccines will arrive, their effectiveness, or even if some will actually be marketed after rigorous testing. In addition, some countries may have difficulties in meeting the conditions required to distribute doses.
The gains of the Mexican peso may also be limited following the recent rally, which left the currency valuated neutral, with a real effective exchange rate 0.4% above the five-year average. The Chilean peso is down 5.6%.
While the currencies of Mexico and Chile stood out in Bloomberg’s analysis, Malaysia’s ringgit performance may be affected as the Southeast Asian country purchased comparatively fewer doses of vaccines.
The study also identified some clear exceptions. Although the Czech Republic has ordered the highest number of doses as a percentage of the population, relatively looser restrictions and an overvalued real effective exchange rate make the krona less likely to outperform. China ranks last in terms of dose distribution due to a lack of information on domestic vaccines.
NOTE: Marcus Wong is an Emerging Markets Strategist at Bloomberg News. Your comments are not intended to provide investment recommendations.
© 2020 Bloomberg LP
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