The peso appreciates against the dollar due to financial optimism: 22.58

The peso begins the session with an appreciation of 0.49% or 11 cents, trading around 22.58 pesos per dollar. It should be remembered that, in the week, the peso accumulates an appreciation of 2.04%, being the first weekly advance since the beginning of June.

The weekly appreciation of the peso is mainly due to optimism sessions in global financial markets with the publication of positive economic indicators for June, mainly from the United States.

The session begins calmly, since the financial markets will remain closed in the United States due to the commemoration of Independence Day, and therefore no economic indicators will be published in that country.

This reduces the volumes of operation in the foreign exchange market significantly, mainly from 11:00 am, after the closing of the markets in Europe.

In Mexico and other countries, no relevant statistical information will be published either, so a decrease in exchange rate volatility is likely. The only statistics to be released will be for new infections and deaths from Covid-19.

The peso and the pandemic

In subsequent sessions, risk aversion episodes cannot be ruled out, as there are significant risks to the economic recovery of the United States and its main trading partners, mainly the accelerated growth of coronavirus cases.

This Thursday, 56,800 new infections or 2.1% were registered in the United States, a record figure that also implies an acceleration of the rate of infections. The states with the highest number of new cases continue to be Florida, Arizona, Texas and California.

Indicators of Banxico

In Mexico, a record number of new cases of 6,741 contagions in 24 hours was also recorded, bringing the confirmed number of deaths to nearly 29,200, ranking sixth globally and surpassing Spain, which has registered 28,368 deaths. It is important to note that the figures are not directly comparable with other countries, as different strategies have been used for counting cases.

During the session, an exchange rate is expected, trading between 22.35 and 22.70 pesos per dollar. The euro begins the session with a depreciation of 0.10%, trading at $ 1.1228 per euro, while the pound depreciates 0.08% and is trading at $ 1.2458 per pound.

Money and debt market

In Mexico, the yield on 10-year M bonds remains unchanged at 5.71 percent.

Derivatives market

To hedge against a depreciation of the peso beyond 23 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 1.21% and represents the right but not the obligation to buy dollars in the level mentioned above.

On the other hand, the interbank forward for sale is at 22.6711 at 1 month, 23.0776 at 6 months and 23.5421 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE