(Bloomberg) -- Stretched valuations and crowded positioning are adding to depreciation pressure on some of the most popular Latin American currencies, according to Credit Agricole CIB.

“We have discussed the challenging environment since May and it is now just finally panning out,” Olga Yangol, the bank’s head of emerging-markets research and strategy for the Americas, said in a Bloomberg TV interview referring to Latin American currencies. “We are still underweight the Mexican peso, Brazilian real and the Colombian peso,” she said.

Elections in both Mexico and the US in 2024 could lead to “antagonistic rhetoric,” which is one reason for the bearish forecast for the peso, Yangol said. 

Emerging-market currencies are coming close to wiping out this year’s gains as higher-for-longer Federal Reserve rate bets bolster the dollar while China’s economic woes also weigh on sentiment. 

Some key takeaways from Yangol:

  • Overweight Indonesian rupiah versus the Taiwan dollar on Indonesia’s better growth outlook
  • Small overweight on the South African rand on valuation

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