Recent analyses from BNY and HSBC highlight the resilience of Latin American and Australian currencies, respectively, driven by attractive carry trade opportunities and robust economic fundamentals. According to BNY’s Geoff Yu, Latin American currencies are supported by strong balance-of-payments positions and appealing carry, even as global equity market volatility increases. Yu emphasizes that conflict-era inflows have created a buffer against potential US Dollar strength, and notes that the Peruvian Sol (PEN) is notably under-owned in the region. However, he also points out that overall FX total return prospects in Latin America lag behind those in EMEA and APAC high-yield peers [1].
BNY further notes that Mexican retail sales and IGAE activity data are expected to show moderate gains in domestic demand, which are unlikely to alter Banxico’s easing path, as real rates remain high relative to price risks. The biweekly CPI is projected at 3.25% year-over-year, with minimal sequential growth in both headline and core components. Yu suggests that inflation in Mexico could surprise to the downside if greater pass-through occurs at current USD/MXN levels, but maintains that the direct risk-reward for total return in Latin American FX is weaker compared to other regions [1].
In a separate analysis, HSBC strategists argue that the Australian Dollar (AUD) is positioned for a potential rebound into 2027, supported by Australia’s relatively high cash and government bond yields. These yields make the AUD attractive for carry trades within G10 FX. HSBC also notes that AUD/USD may have already bottomed, citing the currency’s sensitivity to global growth and the resilience of US economic activity, particularly when the Federal Reserve is on hold. This environment is seen as favorable for growth-sensitive currencies like the AUD [2].
Both reports underscore the importance of carry trades and yield differentials in supporting currency resilience, though BNY highlights that Latin American FX total return prospects are currently less compelling than those in other high-yield regions, while HSBC is more optimistic about the AUD’s outlook due to supportive yield and growth dynamics [1][2].
CONCLUSION
The analyses from BNY and HSBC indicate that both Latin American and Australian currencies are benefiting from strong carry trade dynamics and supportive economic fundamentals. While Latin American FX is resilient, its total return prospects lag behind other high-yield regions, whereas the Australian Dollar is seen as well-positioned for further gains amid favorable yield and growth conditions.