FX: Oversold...For Now

The current bout of global risk aversion has led to a substantial sell-off across Latin American currencies in recent trading. While the global economic outlook remains unclear - as the eurozone sovereign debt crisis unravels and mixed data from the US imply a domestic demand slowdown - we believe there could be more downside ahead for regional currencies, in particular those closely correlated to commodities such as the Chilean and Colombian pesos.

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