Could it be that the Mexican peso’s good streak finally ends?

After his bearish bets on the Mexican peso disrupted by what will be the biggest annual rally in at least a quarter of a century, many banks Wall Street They say, once again, that the coin’s winning streak is over.

The peso has strengthened about 14% to 17.07 per dollar this year, the best performance in emerging markets after the Colombian peso. The rebound has been supported by factors such as high interest rates in the country, strong remittances and the nearshoring trend.

Morgan Stanley, which expected the peso to end this year at around 20.5 to the dollar, says the underperformance will be “a story from 2024″, as rate cuts make it less attractive to investors investors who finance bets with loans in hard currency.

Bank of America Corp is also bearish and favors the Brazilian real over the peso due to the likelihood of an aggressive easing cycle in Mexico during the second half of the year.

The “Expensive peso valuations should finally begin to correct” after a year in which it became “the darling of EMFX”said Ioana Zafir, a strategist at Morgan Stanley. The presidential elections in USA and Mexico will increase volatility, he added, while a possible slowdown in the world’s largest economy will hit the Latin American nation more strongly.

“Next year, all these factors will surely create headwinds for the currency“said Zamfir.

Claudia Sheinbaum, candidate for the party of President Andrés Manuel López Obrador and who maintains a strong lead in the polls before the June elections, has yet to formulate her economic policy.

But the presidential race of USA may prove to be an even greater risk for the peso, which plummeted when donald trump He first came to power in 2016. Now, the former president leads in the monthly tracking survey of the seven decisive states for next year’s elections.

However, not everyone is pessimistic about weight.

Hari Hariharan, CEO of hedge fund NWI Management based in NYremains neutral on the currency while monitoring the central bank’s next steps Mexico. Policymakers raised their 2024 inflation forecast last week and gave no indication they were ready to start reducing borrowing costs.

“We are seeing this strident divergence in which Mexico still sounds restrictive”Hariharan said. “We could once again see notable pressure towards appreciation”.

Others remain relatively bullish. JPMorgan Chase & Co.’s Anezka Christovova and Jefferies’ Brad Bechtel argue that favorable global trade patterns could leave the peso in overvalued territory even as the appeal of the carry trade wanes.

“Even if we don’t get a massive Fed easing cycle like some expect, there will still be a lot of carry on EMFX”said Bechtel, global head of foreign exchange at Jefferies in NY. He expects the peso to appreciate to 16.25 per dollar by the end of the year.

The median forecast among analysts surveyed by Bloomberg is that the Mexican peso will weaken to 17.78 per dollar by the end of next year, about 4% less than current levels. Some, like BofA, suggest betting that the Brazilian real will win against the peso, strategists such as Ezequiel Aguirre wrote this month in a note.

“Our main view that most of the peso’s resistance has been largely driven by the carry trade remains unchanged”they said.