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The peso depreciates against the dollar to 19.94 units

In line with expectations, the peso closed the session with a depreciation of 0.62% or 12.2 cents, trading around 19.94 pesos per dollar, with the exchange rate touching a minimum of 19.7850 and a maximum of 19.9940 pesos.

The depreciation of the peso was due to two factors:

First factor

A drop in oil prices was observed: in the exchange market, the Mexican peso lost along with other currencies, ranking as the third most depreciated, behind the Colombian peso that lost 1.03% and the Norwegian krone, which fell 0.79%, followed of the Russian ruble with 0.69%, the South African rand with 0.66% and the Canadian dollar with 0.59%, all currencies of countries producing raw materials.

The WTI closed with a decline of 1.48%, trading at 62.44 dollars per barrel, on par with most energy sources, due to the strong increase in cases of Covid19 in Asian countries, mainly in India, which accumulates approximately 25% of new cases in the last week globally.

It should be noted that India is the third largest importer of crude oil, so a stagnation in the country’s economic recovery implies a brake on the demand for hydrocarbon.

Second factor

The close relationship with the US dollar is maintained.

The dollar weighted index rose 0.28%, the first increase after six consecutive sessions down, in a corrective movement that was also observed in other financial markets, mainly capital markets.

This is due to a decrease in risk appetite caused by the global advance in coronavirus cases and the absence of relevant economic indicators.

Risks

In capital markets globally, significant declines were observed, mainly in Europe, where the main indices fell on average about 2%, while in the United States the S&P 500 lost 0.68% and the Nasdaq fell 0.92 percent.

Despite the downward correction this week, both indices accumulate gains of 10.09% and 6.97% in the year, respectively.

The lower appetite for risk also translated into higher demand for risk-free instruments. The yield rate of the 10-year Treasury bonds closed with a drop of 4.2 basis points, standing at 1.56%.

In contrast, in Mexico, the yield rate on 10-year M bonds showed an increase of 12 basis points, reaching 6.72%, its highest daily increase since March 24.

Labor sector and the peso

In Mexico, although no relevant economic indicators have been published, there are still events that could raise the perception of internal risk.

This afternoon the Senate is expected to discuss the new regulation on labor outsourcing that aims to prohibit companies from making use of outsourcing for permanent or essential activities of the operation.

The measure raises the risk of a slow recovery in the labor market that already showed a significant slowdown in the first quarter.

It should be remembered that, according to the IMSS registry, during the first quarter about 252 thousand jobs were created, being the lowest job creation for the same period since 2013, excluding 2020.

In the session, the euro touched a low of 1.2023 and a high of 1.2080 dollars per euro. Finally, the euro peso touched a minimum of 23.8532 and a maximum of 24.0443 pesos per euro.

At the close, interbank prices for sale stood at 19.9423 pesos per dollar, 1.3938 dollars per pound and 1.2031 dollars per euro.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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