PEN: Still Scope For Appreciation
June 2008 | Currency ForecastIf you would like to subscribe to Emerging Markets Monitor and gain instant access to this article, please click here to subscribe.
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We have trimmed our end-2008 FX forecast for the Peruvian sol to PEN2.6500/US$ from PEN2.5000/US$ previously. Central bank interventionary measures and deteriorating (albeit still supportive) terms of trade have knocked the wind out of the currency's appreciatory run in 2008, resulting in the unit losing 8% of its value since early April to trade at PEN2.9021/US$. With investors seemingly on the sidelines, we cannot discount the possibility of further PEN weakness in the short term, especially if a dollar comeback and commodity price correction start to take grip. That said, we continue to keep faith with the Peruvian growth story, which, together with the likelihood of higher local rates in H208, should help drive the sol through key resistance towards our end-year target over the coming months.