The Mexican peso is trading at 19.94 against the dollar
The peso starts the session with little change compared to Friday’s close, showing an appreciation of 0.04% or 1 cent and trading around 19.94 pesos per dollar, with the exchange rate touching a minimum of 19.8924 and a maximum of 19.9550 pesos.
In the foreign exchange market a weakening of the US dollar is observed with the dollar weighted index losing 0.11%, resuming its downward trend.
The peso
The moderate appreciation of the peso is due to a combination of factors, among which the following stand out:
First factor
Optimism is observed in global financial markets, starting with the Asian session.
In Japan, a quarterly economic growth of 3.0% was released today during the fourth quarter, exceeding the expectation of 2.4 percent.
This had a positive impact on the capital market with the Nikkei 225 index advancing 1.91 percent.
European capital markets have followed the trend, observing widespread gains, with the main indices advancing 0.98 percent on average.
In the United States, the financial markets (capitals and bonds) will remain closed for President’s Day, so a low volume of operations in the foreign exchange market is anticipated, particularly after 11:00, with the closing of the European markets.
Second factor
Oil prices have risen on the commodity market.
The price of WTI starts with an advance of 1.90%, trading at 60.60 dollars per barrel, touching a maximum of 60.95 dollars, a level not seen since January 8, 2020. Oil prices rise due to the cold front that impacted the state of Texas in the United States and that has slowed the production of crude in the region that normally represents about 50% of US crude.
Oil production in the region has fallen by about 1 million barrels a day from the nearly 6 million barrels normally produced a day.
Third factor
The cases of Covid-19 continue to slow down, in the United States on Saturday 84 thousand infections were registered, below the average of the last seven days of 97 thousand.
The UK authorities announced that they have already met their first goal of vaccinating all people over 70 years of age, as well as health workers.
This also contributes to the optimism of the financial markets.
The pandemic
Regarding relevant news, today in Mexico the vaccination plan for the elderly in rural areas began.
The Ministry of Health pointed out that they currently only have 870 thousand doses, so the application of vaccines in urban areas would have a zero impact.
Since it is a holiday in the United States, no economic information will be published in that country today.
In Mexico, the publication of relevant economic information is not expected either.
It should be added that little economic information will be published during the week, highlighting on Thursday the Monthly Survey of the Manufacturing Industry for the month of December and the Timely Indicator of Economic Activity for the month of January, which will be published on Friday.
During the session, the exchange rate is expected to trade between 19.88 and 20.00 pesos per dollar.
The euro starts the session with an appreciation of 0.10%, trading at 1.2132 dollars per euro, while the pound gains 0.43% and is trading at 1.3909 dollars per pound.
Money market and debt
In Mexico, the yield on the 10-year M bonds remains unchanged at a rate of 5.59 percent.
The peso and the derivatives market
To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 2.05% and represents the right but not the obligation to buy dollars in the aforementioned level.
On the other hand, the interbank forward for sale is at 19.9947 at 1 month, 20.3188 at 6 months and 20.7066 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
