Speculators raised bearish bets on the Mexican peso to a record level, according to data from the Commodity Futures Trading Commission released on Friday. Mexican net short positions increased to 81,424 contracts in the week ended July 21, from 72,718 the previous week, data showed. The Mexican peso has been one of the worst performing emerging market currencies against the US dollar so far this year, falling 9.3 percent, from losses of nearly 12 percent in 2014.
The peso has been hammered by concerns a US interest rate hike may push investors to dump emerging market assets. Mexico's central bank, however, tends not to intervene in the currency market unlike other emerging market financial authorities. It prefers more market-friendly mechanisms, such as currency auctions.
"Short Latam currencies is a once-in-a-lifetime trade at this juncture," said Bernd Berg, emerging markets strategist at Societe Generale in London. He predicted falls of up to 10 percent against the dollar in coming weeks on the real as well as Mexican and Colombian pesos, noting that all these countries faced deteriorating growth and falling commodity prices, "Additionally they are highly vulnerable to any Fed rate hike due to their current account deficit positions and capital outflows," Berg added. The Brazilian real, meanwhile, showed net longs increasing to 6,206 contracts in the latest week, the highest since mid-February.
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