There are opportunities for managed forex funds if you consider the economic situation in South America. Although these nations are not always in the headlines, they are running a big outfit within the middle income rate. A savvy entrepreneur will pay attention to their relationships with the USD because that might provide relief from the saturated EUR.
The Latam analysis provided the latest figures on the 16th of September in relation to this part of the world. In Argentina the ARS remain constant at 4.204. The BCRA has been pursuing an aggressive intervention strategy. In the parallel FX sector there was a 2 CTS fall so that the new reading was at 4.58. This is a market with possibilities in the future.
The forex potential of South America
The Merval had fallen by 2.16% but there was other great news. The GDP coupon in the USD fell by 3.5% to 73.0 but in ARS it was just -0.6%. The Q2 GDP readings were much higher than expected at +9.1% on an annual basis and +2.5% on a quarterly basis. Brazil was also of interest to speculators. The BRL is losing ground due to a long position and a weaker global economy.
The managed forex funds might want to take note of the fact that the BRL lost 2.1% in the week with a final reading of 1.7331. It is surprising that the BCB did not intervene when virtually every other financial authority in the world was studying the market. The government got in a bit of trouble with a regulation which purported to clarify the IOF tax regime in relation to derivates.
Although this was just a technical clarification, it was enough to get people worried about the future. An extended position on the USD might be penalized under these rules and therefore entrepreneurs have to watch this space carefully. The DI rates remain very flexible with low volume trading. The Jan 13 Di was at 10.61 which climbed at 10.78%.
The national interests that are driving the forex sector
The weekly readings on the DI were 8bps which is 10.63. This is not a good outlook for the wider economy. The 5Y CDS was tightening at 8bps which is 159.7. There was encouraging news for Bovespa which was up to 1.3% to close on 57,210. On the 15th of September the FGV IPC-S readings were released and they confirmed to fall -0.69%. Lower food prices were blamed.
We can also consider the case of Chile as one of the most developed economies within the region. The CLP retraced the gains it had in the previous weeks but was still down at 480.4 which is -3.2%. The IPSA was -2.98%. The BCU curve was 15bps down to 2.07%. This is the space to watch in terms of the managed forex funds.