GTQ: Back To Weakness

The Guatemalan quetzal is currently experiencing its seasonal sell-off against the US dollar, as increased imports to meet fourth quarter sales demand have seen the GTQ/US$ exchange rate weaken by over 2.0% since mid-August. In the short-term we expect the quetzal to head back to support at GTQ8.1900/US$, although with the authorities stepping up intervention to prevent a more rapid move to the downside (with US$32mn dollar sales on September 27-28), we do not expect a significant move beyond this level. Nevertheless, as US demand for Guatemalan exports slows heading into 2011, we believe the currency has now passed its peak, and will be unable to return to the GTQ7.9000/US$ highs reached in Q310. As a result, we maintain our end-2010 forecast of GTQ8.1200/US$.

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