We revise down the peso against the dollar

Genevieve Signoret

Currencies

Under central-scenario assumptions, of which a key one is that Greece and its creditors reach an accord this summer, we expect emerging market currencies to fall against the U.S. dollar on trend now through the start of normalization (probably in September), then recover by year end and beyond.

We summarize this expected path for emerging market currencies in the table below in the line showing our (recently revised) quarterly forecast trajectory for 1 dollar in Mexican pesos. In it, the peso crashes to US$1.00=MXN16.00 in Q3, then recovers to 14.70 by the end of December and to 13.80 by September 2016.

image8Of course, in the highly unlikely event that Greece defaults this summer and exits from the euro area, even though the Fed would postpone normalization, the peso probably wouldn’t recover as quickly.

Data compendium

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