Deutsche Bank Bets on Chilean Peso Versus South African Rand

Deutsche Bank Bets on Chilean Peso Versus South African Rand

(Bloomberg) — It’s a trade you don’t often see: shorting South Africa’s rand versus Chile’s peso.

That’s what Deutsche Bank AG (DE:) recommends, based on the diverging economic outlook underpinning the two currencies. Strategists David Petitcolin and Sebastian Brown are targeting a gain for the Chilean currency to 45 per rand, from Thursday’s level of around 48.8, with a stop-loss at 50.5.

The rand has advanced 1.3% against the Chilean peso this year, buoyed by a dovish global policy background and, more recently, the ruling African National Congress’s victory in general elections on May 8. The gains could be short-lived, as President Cyril Ramaphosa may face opposition to his reforms plans, Petitcolin and Brown said. The finances of the state-owned electricity company, Eskom Holdings SOC Ltd., are also a concern, they said.

“Optimism will prove short-lived as the market quickly refocuses on deteriorating fundamentals,” the strategists wrote. “We favor trading our bearish rand view against the peso, another metals exporter, but one which benefits from an ongoing growth recovery.”

It’s a brave call: the options market gives about a one-in-five chance of the cross reaching 45 in the next three months, according to Bloomberg’s forecast model. The peso weakened 0.2% to 14.74 per rand by 5:39 p.m. in Johannesburg.

(Updates rand-peso move in final paragraph.)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.