As hard currencies pour into the region's economies looking
for upside, the money flowing in is pushing exchange rates higher--up
27% over the past two years, according to Citigroup. For investors who
hold their shares in Brazilian reals or Colombian pesos, that's an
extra double-digit gain on top of roaring stock markets, largely driven
by massive amounts of raw materials exporting, rising foreign trade, and
domestic economic health.
But, analysts point out, much of the gains made recently came just
after the huge emerging market sell-off that affected share prices
around the world. While Argentina has been weak by comparison and Chile
and Mexico trade within expected ranges, it's Brazil and Colombia
that have seen the biggest rise in currencies. Watch for strong local
money to help industries that have to buy supplies from abroad (like oil
for jet airplanes) and watch for a drubbing for raw materials exporters
with thin margins, warns Citi.
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