Currencies of Chile, Brazil, Colombia and Mexico Rise against USD

Four Latin American currencies have strengthened against the U.S. dollar this year, supported by attractive carry trades and investor optimism around the region’s medium-term growth prospects, underpinned by strong commodity exports.

The Chilean peso has risen 5.14% against the dollar so far this year, followed by the Brazilian real at 4.79%, the Mexican peso at 4.56% and the Colombian peso at 4.03%, according to Bloomberg data.

Analysts say growing demand for precious metals such as gold and silver, along with a broader diversification of international reserves, has encouraged investors to reduce exposure to the U.S. dollar. Latin America’s role as a major exporter of minerals and other commodities — priced largely in dollars — has resulted in sustained foreign currency inflows, providing key support to regional currencies.

Brazil’s real has benefited from the country’s extensive commodity exposure and its position as Latin America’s largest economy, drawing yield-seeking capital away from the United States, Bloomberg Línea reported, citing analysts at Credicorp.

Mexico’s peso continues to attract institutional inflows due to its deep liquidity, strong carry trade appeal, nearshoring trends and solid external balances.

Chile’s peso has gained alongside higher copper prices and improved demand from China, while Colombia’s peso has been supported by the commodity cycle, shifts in risk premia, government borrowing flows and expectations of future pension fund repatriation.