PYG: Inflation Still The Key

June 2006 | Currency Forecast

The guarani has been the best-performing Latin American currency against the dollar this year, having surpassed even our most bullish expectations. With the PYG having appreciated by 9.4% this year, the central bank is under pressure from the export sector to intervene to weaken the currency. This is easier said than done, as the central bank acknowledges that dollar purchases increase domestic liquidity and exacerbate existing inflationary problems. In any case, with the soy export season winding down, dollar inflows may begin to dry up, and this should leave the guarani trading with a softer tone for the rest of

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