Latin American currencies will likely weaken further following a tough January, although the Mexican peso could break away from the pack due to its smaller dependence on commodities, a Reuters poll showed on Wednesday.
Foreign exchange strategists in the poll lowered their outlook for Latin American major currencies from a month ago.
The Brazilian real is expected to weaken 7 percent within 12 months, to a record low of 4.30 per dollar, compared with the month-ago forecast of 4.25 per dollar. The poll cut the Mexican peso's 12-month outlook from 17.00 to 17.50, which is 5.6 percent stronger than Wednesday's 18.48 close,
Little changed was the 12-month outlook for the Chilean peso, seen at 718.5 per dollar, while the Colombian peso is expected to be at 3300.0 per dollar by then, compared with 3225.0 in the previous poll.
In recent years, Latin American currency strategists have struggled to predict the bouts of volatility largely due to the sharp drop in commodities prices stemming from China's economic slowdown.
Oil, metals and food dominate Latin American exports, except in Mexico, where manufacturing is predominant. The Colombian peso and the Brazilian real were particularly vulnerable to the commodities' price plunge.
In addition, the real is seen as prone to further sell-offs because of the deep political and economic crisis. Although many analysts view the real as undervalued, they expect additional losses as the economic recession bites and the government scrambles to plug the swelling budget deficit.
"Authorities seem to be persisting in the same errors that caused the economy to lose its investment-grade status and experience the worst recession in a century," said Marcos Casarin, head of LatAm macro research at Oxford Economics.
Mexico is seen at a better position, despite a steep 5-percent drop in the peso in January.
Its bond yields have outperformed most emerging markets and foreigners poured money into the country, suggesting the peso decline was actually caused by hedging of local fixed income positions, said Eduardo Suarez, strategist at Scotiabank.