PEN: Appreciatory Momentum To Slow In H210

Having brought an end to sideways trading against the US dollar with a break through key resistance at PEN2.8400/US$ at the beginning of March, on a technical basis the Peruvian sol looks ripe for further appreciation. Peru's external environment lends additional weight to this view, with strong commodity prices and the return of global risk appetite indicating that a period of intense upside pressure is in store for the currency. However, we believe that the potential for gains will be contained by the willingness of the central bank to intervene to stem sol appreciation, and while we believe it will not be able to prevent modest gains towards PEN2.8200/US$ in the short term, this will avert a more pronounced appreciation in the unit.

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