The peso starts the session with a depreciation of 0.18% or 3.5 cents, trading around 19.90 pesos per dollar, although without a clear trend, trading between 19.8365 and 19.9706 pesos.
The Mexican peso is one of the few currencies that lost ground this morning, ranking as the fourth most depreciated currency in the wide basket of main crosses, after the Norwegian krone that lost 0.44%, the pound sterling with 0.41% and the Hungarian forint with 0.39 percent.
The depreciation of the peso is due, in part, to a greater perception of relative risk over Mexico, after the Ministry of Energy reduced the duration of fuel import and export permits by the private sector from 20 to 5 years, which will have a negative effect on investment in the country and, therefore, on the rate of recovery of the economy.
It should be noted that during the last sessions of the year there is a decrease in the volume of operations in the foreign exchange market, which tends to cause quiet sessions, but increases the risk of volatility episodes in the face of news or other events. Very little relevant economic information will be published this week, highlighting in Mexico the publication on Wednesday the 30th of the budget balance for the month of November, while in the United States the initial applications for unemployment support will be published on Thursday the 31st in the morning. Due to the above, it is expected that the exchange rate movements will be mainly based on news about the Covid19 pandemic.
The peso and the United States
This morning most currencies gain ground against the dollar, as the perception of risk decreases, after the weekend President Donald Trump signed the stimulus package of 900 billion dollars, tied to the spending budget for the fiscal year 2021 of 1.4 trillion dollars. The new stimulus package includes $ 300 a week of unemployment support available until March 14, a round of direct checks of $ 600 per person is also included, as well as financing for schools, small businesses and for the distribution of vaccines against Covid19, among other support to boost economic recovery.
Capital markets reacted positively to the signing of the stimulus in the United States, with the main indices in Europe advancing more than 1% in the session. In the futures market, the main indices in the United States are expected to open with gains of between 0.50 and 0.80%. A similar behavior is observed in the raw materials market, with the price of WTI advancing 1.10%, as well as the majority of energy and industrial metals.
Covid19 is likely to continue to be the source of unfavorable news globally, so the optimism in the markets could be temporary. In the United States, the government physician specializing in immunology, Anthony Fauci, warned that a rebound in Covid19 cases is expected due to the Christmas holidays and New Year’s celebrations.
During the session, the exchange rate is expected to trade between 19.88 and 20.04 pesos per dollar. The euro starts the session with an appreciation of 0.20%, trading at 1.2217 dollars per euro, while the pound loses 0.39% and is trading at 1.3507 dollars per pound.
Money market and debt
In the United States, the yield on the 10-year Treasury bonds increases by 3.2 basis points, to 0.95%, while in Mexico the yield on the 10-year M bonds remains at a rate of 5,505 percent.
To hedge against a depreciation of the peso beyond 20.00 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 2.23% 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 19.9680 at 1 month, 20.3112 at 6 months and 20.7221 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.