By Ye Xie, Justina Lee and Andrea Wong
The diverging global economy means the U.S. dollar will drag Mexico’s peso and Russia’s ruble along with it to the biggest gains among major currencies this year, while New Zealand’s dollar and Argentina’s peso will turn into the biggest losers.
That’s the conclusion of economists, strategists and investors surveyed by Bloomberg. They see Mexico’s exchange rate gaining 11 percent by the end of 2015, with the U.S. Dollar Index rising about 3 percent and the ruble climbing 22 percent. Argentina’s peso is forecast to weaken 29 percent as New Zealand’s dollar drops about 5 percent. Even the euro, which today slipped below $1.20 for the first time since 2010, is seen falling another 1 percent.
With the U.S. economy forecast to grow at the fastest pace in a decade, Mexico’s exports to its northern neighbor and largest trade partner may benefit. That’s in contrast to the euro region and Japan, where stagnant growth and the threat of deflation dominate. In New Zealand, policy makers have stopped raising interest rates as inflation falls, sending the currency to a 2 1/2-year low last month.
Investors should be “very much focusing on divergences that we are going to have around the world,” Scott Mather, the co-chief investment officer at Pacific Investment Management Co., which oversees $1.9 trillion, said in a Dec. 19 interview with Bloomberg Television. “Dollar strength is going to be a theme well into next year and maybe even longer.”
Faster growth in the U.S. is spilling over to Mexico, offsetting the drag from lower oil prices. The Latin American economy is forecast to expand 3.4 percent this year, compared with an estimated 2.2 percent in 2014 and almost double the region’s average projected growth rate.
The peso will climb to 13.48 per dollar by year-end, according to the median forecast of 40 strategists, after falling 12 percent in 2014 and touching a five-year low of 14.9842 today.
“Improvement in growth will place appreciation pressure on the peso,” Alejandro Urbina, a money manager at Silva Capital Management LLC, said by phone from Chicago on Jan. 2. “There are expectations for capital inflows” as the government opens up the energy sector to foreign investors, he said.
Other winners may be the currencies of commodity producers, which were hit by the 50 percent decline in oil prices since June. Brent crude prices may recover to $76 a barrel, from a 5 1/2-year low of $52.66 today, according to a survey.