06:20 AM EDT, 08/06/2025 (MT Newswires) -- Deutsche Bank has been bullish on Brazil's real (BRL) since May, recommending buying it against Colombia's peso (COP).

While BRL remains undervalued, supported by attractive carry and a cautious central bank, Deutsche Bank said it was "tactically" shifting its recommendation, closing its BRL/COP trade at a roughly 2.2% total return profit since May's publication on the currency.

The bank's rationale centers primarily on the COP leg, as Deutsche Bank's overall bullish view on BRL remains intact.

Elsewhere in Latin America, the bank has been neutral on Mexico's peso (MXN) in the past few months. Last week's sharp decline in remittances underscores one of the key downside risks.

This decline is likely linked to a "significant" reduction in migration flows into the United States, as well as increased deportations, trends that Deutsche Bank estimates to persist. Given the bank's broader view of US dollar (USD) weakness, it favors a short MXN position against the euro (EUR), which better captures the bank's "cautious" outlook on the peso.

On USD/MXN, Deutsche Bank has positioned for rangebound trading in the 18.50-19.0 range, and it believes that risks are symmetric as long as the U.S. economy data shows a gradual descent.

On Chile's peso (CLP), Deutsche Bank closed its long CLP/PEN recommendation at a loss last week, primarily driven by a dovish shift from Chile's central bank (BCCh). The fact that most of Chile's copper exports to the U.S. are exempt from the U.S. copper tariffs should limit further depreciations, in a context where offshores have re-engaged in USD/CLP longs.

Given its low funding cost, the bank "tactically" recommends using CLP as a funder for BRL longs. Toward year-end, Deutsche Bank expects some CLP outperformance on the back of the elections -- first round is in mid-November, second round in mid-December -- where the bank projects to more market-friendly opposition to obtain good results.