Although Latin American currencies have performed “surprisingly well,” risks will also increase if volatility continues to rise, strategists including Dirk Willer and Ernesto Revilla wrote in a note on Wednesday.
The bank also reduced its overweight in US rate-hedged Colombian assets to neutral; added US rate coverage to Brazil’s position; and halved its position with respect to the Mexican peso.
“Although we do hedge US rates and receive carry trades in a long and short basket, during days of sharp volatility such hedges generally don’t work as it’s all about positioning, rather than fundamentals. ”.
