Latin America Foreign Exchange and Rates Strategy: Local Markets Scanner: July

Research evidence excerpt

Latin America Foreign Exchange and Rates Strategy: Local Markets Scanner: July

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14 Jul 2026 11:52:32 ET │ 22 pages

Latin America Foreign Exchange and

Rates Strategy

Local Markets Scanner: July

Ivan Riveros,CFA AC

CITI'S TAKE +1-212-723-0865

ivan.riveros@citi.com

Renewed tensions in the Middle East injected volatility as investors reduce

risks globally. In LatAm, the focus has remained on a few idiosyncratic Luis E Costa, CFA AC

stories. At the forefront, we have Colombia, where ADLE presidential win +44-20-7986-9757

has driven a rally in local assets. In Peru, rates benefitted from another right- luis.costa@citi.com

wing shift as we transition to a Fujimori presidency. In Brazil, more hawkish

sentiment and the consolidation of Lula’s lead in recent polls have Laura Bobbio

translated into the dialing down on DI receivers and long BRL among locals, +44-20750-87794

adding to the new wave of dollar strength. In Mexico, pension funds laura.bobbio@citi.com

remained large buyers of debt over the month, while offshore investors

stayed on the sidelines. In Chile, we had confirmation of new bond supply

concentrating on hard currency, while offshore investors have turned into

overall net Camara receivers, being large USD buyers over the month. We

also add AFP swap positioning in Chile.

Brazil — Local hedge funds have been unwinding their long BRL and DI receivers

positions over the past few weeks. While they remain overall positioned long local

assets, they seem to have turned towards DI steepeners. Returns were still primarily

correlated with long equity exposures. Our model suggests excess term premia

edged higher over the month, probably on the back of more hawkish sentiment and

of the consolidation of Lula’s lead against Flavio Bolsonaro in recent polls. BRL