PYG: More Moderate Appreciation Ahead

The Paraguayan guarani has strengthened significantly against the dollar through February and March, decisively breaking through the short-term target of PYG4,500/US$ we set on 9 December 2010. These gains were accentuated by a weaker dollar and despite the currency bouncing off around the PYG4,000/US$ level on 10 April 2011, we expect a clean break through this level to presage a move down to PYG3,950/US$ in the short term. The guarani's relative illiquidity can lead to uneven trading at times, however we believe Paraguay's strong growth trajectory and high export revenues will mean the currency averages PYG3,900/US$ through

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