The peso closed with a depreciation of 1.64% or 33.9 cents, trading around 20.94 pesos per dollar, with the exchange rate touching a minimum of 20.5524 and a maximum of 20.9988 pesos per dollar.
It should be noted that the depreciation of the peso slowed near the level of 21.00 pesos per dollar, confirming a resistance at that psychological level.
The Mexican peso was the most depreciated currency in the basket of main crosses, after the Brazilian real erased its losses after 1:30 p.m. The depreciation of the peso was mainly due to the following factors:
An increase in rates of return was observed in the bond market.
The 10-year Treasury bond rate rose 7.4 basis points, reaching 1.46%, resuming the upward trend of previous weeks, reaching a maximum of 1.49 percent.
It should be remembered that the increase in interest rates is the result of a reduction in demand for bonds in anticipation of a less flexible monetary policy by the Federal Reserve.
This has also caused losses in the capital market, mainly in sectors that advanced strongly during the pandemic, such as technology.
The S&P 500 closed 1.31% lower, while the Nasdaq lost 2.70%. In the foreign exchange market, the dollar weighted index closed with an advance of 0.28 percent.
The perception of relative risk in Mexico remains high, after the approval in the Senate of the reform to the Electricity Industry Law, which represents a downward risk for investment and economic growth.
This increases the propensity of the peso to lose ground against the dollar in the face of cautionary episodes such as today.
Going forward, it is likely that the exchange rate will continue to face upward pressure towards the 200-day moving average that today stands near 21.20 pesos per dollar.
The exchange rate has been below this moving average since the beginning of October 2020.
The higher perception of risk could also lead to a greater outflow of capital.
In the year to February 22, the holding of government securities by foreign residents shows a decrease of 43,178.16 million pesos or 2.28 percent.
Only in February to the 22nd, the output is 32,704.71 million pesos.
Taking into account only the 22nd, an outflow of 10,681.00 million pesos is observed.
It is important to note that the Brazilian real, which for most of the session was the most depreciated currency, erased its losses after 1:30 pm to close with an appreciation of 1.18% at 5.5975 reais per dollar.
The appreciation of the Brazilian real is due to the fact that, according to a congressman in the lower house, the new fiscal support measures that are being discussed will not exceed the ceiling of spending programmed for this year.
The partial recovery of the Mexican peso during the afternoon was related to the strong recovery of the Brazilian real.
On the other hand, in Banco de México’s quarterly report, the economic growth scenarios for 2021 were adjusted upwards.
In the previous report, the central scenario was located at 3.3%, with an interior limit of 0.6% and an upper limit of 5.3 percent.
In the report published today, the central growth scenario stands at 4.8%, with a lower limit of 2.8% and an upper limit of 6.7 percent.
For its part, the general inflation estimate for the fourth quarter of 2021 was revised up from 3.3% to 3.6%, projecting a convergence towards the goal of 3% in the second quarter of 2022.
For 2022, the central growth scenario is at 3.3% (revised up from 2.6%), with a lower limit of 3.0% and an upper limit of 3.4 percent.
The exchange rate and the peso
In the session, the euro touched a low of 1.2043 and a high of 1.2113 dollars per euro. Finally, the euro peso touched a minimum of 24.8408 and a maximum of 25.3380 pesos per euro.
At the close, interbank quotes for sale stood at 20.9448 pesos per dollar, 1.3956 dollars per pound and 1.2069 dollars per euro.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.