Mexico's peso to recoup some losses after slumping due to judicial reform
reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/fx-polls?RIC=BRL= poll data on Brazil real
reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/fx-polls?RIC=MXN= poll data on Mexican peso
By Gabriel Burin
BUENOS AIRES, Oct 2 (Reuters) -Mexico's peso will recoup some losses in the medium-term if the country's new government holds back from pressing more controversial changes like a judicial reform that has eroded market sentiment in recent months, a Reuters poll found.
The currency has shed 13.4% since June when President Claudia Sheinbaum was elected and pushed for approval in Congress of a judiciary overhaul that stoked investor worries about the soundness of Mexico's legal framework.
Looking forward, the peso MXN= is set to gain 2.2% in 12 months to 19.20 per U.S. dollar from 19.63 on Tuesday, according to the median estimate of 19 foreign exchange strategists polled in the Sept. 30-Oct. 2 period.
"As financial markets digest judicial reforms with no additional constitutional reform pursuits, we believe the USD/MXN exchange rate can move lower over time despite an environment of greenback strength," Wells Fargo economists wrote in a report.
"With that said, lingering political risks should prevent the Mexican peso from trading back at pre-election levels over our forecast horizon," they added. The bank's estimate for the currency in one year stood at 19.25 per dollar.
Some analysts expect Sheinbaum to calm investors who are disenchanted with the passing of the reform initially proposed by her predecessor, Andres Manuel Lopez Obrador. The changes mean that judges will be elected by popular vote.
Sheinbaum, Mexico's first woman president, was sworn in on Tuesday, taking the reins at a time when the country is struggling with violence from organized crime and a hefty deficit in Latin America's second-largest economy.
Elsewhere, Argentina's tightly managed official exchange rate for the peso ARS= is projected to weaken 32% in 12 months to 1,425 per dollar from 970 on Tuesday.
The currency has shown surprising stability this year in both its main and parallel markets, as President Javier Milei's government implements deep spending cuts aimed at slashing Argentina's chronic deficits, even in the face of rising poverty.
A reduction in the spread between the peso's official and secondary rates has led to speculation about a possible near-term devaluation to "unify" them at a single rate, a prerequisite for the potential elimination of strict capital controls.
"However, we'll have to see if the government ends up leaning towards a more political logic (by keeping the current multiple FX system) in the hope disinflation will continue before next year's mid-term vote," said Ignacio Ruiz at Ecolatina.
The Argentine and Mexican pesos are down 16.6% and 13.7%, respectively, so far this year. The Brazilian real BRL=, BRBY has shed 10.7% and is expected to strengthen 1.9% in one year to 5.33 per dollar.
(Other stories from the September Reuters foreign exchange poll)
Reporting and polling by Gabriel Burin in Buenos Aires; additional polling by Veronica Khongwir and Purujit Arun in Bengaluru; editing by Paul Simao
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