Hopes of a massive policy response to the euro zone debt crisis will likely push most Latin American currencies further up in coming months, a Reuters poll showed on Wednesday. But forecasts from the 44 analysts surveyed world-wide were spread over a wider range than in a similar poll conducted three months ago, suggesting that forthcoming events are not fully priced in yet.
Uncertainty over upcoming moves by the world's major central banks and concern over government intervention still cloud the outlook over the next twelve months, strategists said.
With the exception of the Brazilian real, all major Latin American currencies have been gaining some ground since early June, when debt-stricken Greece averted a full-blown default by managing to elect a pro-reform government.
If the European Central Bank President Mario Draghi fulfils his promise to do "whatever it takes" to save the euro from the region's spiralling debt crisis, the current upward trend may last longer, the poll suggests.
"It was all so, so bad, that the risks are on the upside - at least in the short run," said Andr Perfeito, chief economist for Gradual Investimentos, in So Paulo, describing market perceptions of the euro zone's woes.
"If we are indeed at the worst moment of this crisis, with 10-year bond yields at their historical lows, things are poised to get better now, not worse."
The Brazilian real, which has traded in a very tight range due to continued government intervention, is expected to gain over 6 percent in the next 12 months to 1.92 real per US dollar.
The Chilean peso is expected to remain close to its current levels, but with a slightly upward trend -strengthening from 494.25 to 490 per dollar from the next month to end-July 2013.
ECB policymakers meeting on Thursday may reveal some clues on plans to resume the bank's controversial bond-buying programme, although dramatic action is probably weeks away.
Traders are also on the lookout for any signs the US Federal Reserve will turn on its money printer for the third time in the past few years to prop up its struggling economy. But again, that is not likely to happen this month.
Yet, rising Latin American currencies is not a certain bet.
Standard deviations of forecasts in the Reuters poll increased in 14 out of the 20 scenarios proposed, and ranges were wider in twelve of them.
Erratic government intervention helps explain part of the uncertainty. The Brazilian real lost 0.5 percent on Tuesday after the central bank let expire $4.57 billion worth of swap contracts due on the following day, essentially reducing the supply of dollars in the futures market.
Latin American governments have intervened in currency markets to keep their currencies from appreciating too much. Overvalued exchange rates reduce the competitiveness of local manufacturers and pave the way for a flood of cheap imports.
Also, some economists are simply not that optimistic. "The flow of external resources to Brazil will be lower due to the crisis," said Sidnei Nehme, chief executive of NGO Corretora, in So Paulo, who along with Unicredit had the most accurate forecast in the previous poll - 1.95 real.
He now predicts the real to climb to 2.15 units per dollar in three months and to 2.25 in 12 months.
The most notable exception is the Colombian peso. Forecasts for the Colombian currency were in a tighter range than in the previous poll and around its current levels, after the central bank surprisingly cut interest rates last week.