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The peso appreciates against the dollar for the 4th week in a row

The peso closed the week with an appreciation of 0.47% or 9.3 cents compared to Friday of the previous week, with the exchange rate trading around 19.84 pesos per dollar, trading in a channel between 19.7850 and 19.9951 pesos.

This is the fourth week in a row in which the peso has gained ground, in which it has accumulated an appreciation of 3.64% or 75.0 cents.

The last time the peso accumulated 4 weeks of gain was in November, when there was strong optimism in the financial markets for the United States elections and the results of the massive tests of the Covid-19 vaccines. In that period he earned 1.1337 pesos or 5.35 percent.

The appreciation extended until the first week of December, accumulating 5 weeks gaining against the dollar, a period in which it accumulated 6.66% or 1.41 pesos.

Peso

The appreciation of the Mexican peso can be attributed to 3 factors:

First factor

The expectation of a less flexible monetary stance in Mexico, even with the possibility of increases in the interest rate, given signs of inflationary pressures.

On Thursday, inflation for the first half of April was published in Mexico, which stood at an interannual rate of 6.05%, above market expectations and its highest reading since December 2017.

It is important to clarify that a factor that contributed to a large extent to this data was a weak comparison base, since April 2020 was the period with the most severe economic effects due to the Great Confinement, which generated falls in price levels.

However, the Consumer Price Index showed a fortnightly increase of 0.06%, the highest rate for the same fortnight since 2009, which implies that the weak comparison base does not fully explain inflationary pressures.

Second factor

Signs of an accelerated economic recovery in the United States. On Thursday, the weekly employment report registered 547 thousand new applications for unemployment support in the week that ended on April 17, below the 610 thousand expected by the market and the 586 thousand of the previous week, being its lowest reading since the pandemic began.

On Friday, the preliminary estimates of the manufacturing and services PMI indices, corresponding to April, were published, which stood at 60.6 and 63.1 points, respectively.

The composite PMI, which includes both sectors (manufacturing and services), stood at 60.6 units, its highest reading since 2009, shortly after the Great Recession ended.

Third factor

Signs of an economic recovery in Europe. As in the United States, in Europe preliminary estimates of the manufacturing and services PMI indices were published, most of which were above the expansion threshold of 50 points.

In the case of the Eurozone manufacturing PMI (63.3), it was a new record high in the series that begins in June 1997, while the UK manufacturing PMI (60.7) had its highest reading since July 1997. 1994.

The peso and other currencies

Thus, in the foreign exchange market, the dollar weighted index lost 0.58% weekly, being its third consecutive week down, not seen since the three weeks between November 20 and December 4.

The most appreciated currencies in the broad basket of main crosses were the Brazilian real (+ 1.75% weekly), the Czech koruna (+ 1.38%) and the Russian ruble (+ 1.15%), while the worst performing currencies were the sun Peruvian (-4.09%), the Turkish lira (-3.77%) and the Chilean peso (-1.13 percent).

On the week, the euro hit a low of 1.1943 and a high of $ 1.2100 per euro. The euro peso touched a minimum of 23.7911 and a maximum of 24.0570 pesos per euro.

At the close, the interbank quotes for sale stood at 19.8387 pesos per dollar, 1.3887 dollars per pound and 1.2099 dollars per euro.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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