Alphacast Highlight - How has Latin America FX responded to the US Dollar appreciation?

By Maia Mindel (mmindel@alphacast.io)

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Through 2022, the US Dollar saw record-high appreciation in Q3 and early Q4, peaking at 18% YTD (DXY Index) - second only to the 26% registered during the Volcker Shock and its astronomical interest rates. However, the dollar normalized in November and December, finishing at a high rate (8%) but not one without precedent in the last 50 years.

The currency of the major economies of Latin America has proven surprisingly resilient. With the exception of Argentina, where the FX felt 33% YTD, most currencies outperformed the Pound (-18%) or the Euro (-13%) and many of them even showed nominal appreciation: Uruguay (6.3%), Brazil (3.3%), Mexico (1.6%), Peru (0.5%), Chile (-12.3%) and Colombia (-10.1%).