The peso depreciates against the dollar to 21.13 units

The peso closed the session with a depreciation of 0.88% or 18.5 cents, trading around 21.13 pesos per dollar, with the exchange rate touching a minimum of 20.7600 and a maximum of 21.1710 pesos, the level where the 200-day moving average.

From a technical point of view, by piercing the resistance of 21.17 pesos, it opens the door for the upward trend of the exchange rate to continue towards the level of 21.50 pesos per dollar.

The exchange rate moved in line with the yield on Treasuries, whose 10-year rate rose to a session high of 1.55% after 11:00 a.m.

The increase in Treasury yields occurred after the conference of Fed Chairman Jerome Powell, who noted that transitory inflationary pressures could be observed this year.

Powell also reiterated that the monetary stance should remain flexible as the goals of full employment and average inflation of 2% are still far away, although these comments have been ignored by market participants. There is still speculation that the Fed may take a more stringent stance if inflation rises more strongly than expected.

At the close of the session, the yield rate of the 10-year Treasury bonds showed an increase of 6 basis points, standing at 1.54 percent.

In Mexico, the 10-year M bond rate increased 14 basis points to 6.25 percent.

The peso

In the foreign exchange market, the dollar strengthened against most of its main crosses, advancing 0.65% according to the weighted index, accumulating an increase of 0.99% in the last two sessions.

The Mexican peso was the ninth most depreciated currency in the broad basket of main crosses, the most depreciated being the South African rand with 1.37%, the Polish zloty with 1.18% and the Czech crown with 1.04 percent.

In the capital markets, generalized losses were observed associated with the increase in interest rates in the bond market.

The S&P 500 closed with a loss of 1.34%, while the Nasdaq lost 2.11 percent.

On the other hand, in the commodities market, the price of WTI oil touched a maximum of 64.86 dollars per barrel, not seen since January 8, 2020, closing with an advance of 4.83% at 64.24 dollars per barrel.

The price increase was due to OPEC and its allies deciding to keep most of the oil production cuts unchanged during April, with the exception of an increase in production of 150,000 barrels a day for Russia and Kazakhstan.

Currently 7 million barrels per day (mbd) are not being produced due to the agreement to cut production amounting to 8 mbd due to a voluntary suspension of production of 1 mbd by Saudi Arabia.

This country also indicated that its voluntary cut will be maintained and the rate at which it will be eliminated will be decided in subsequent months.

The movements of the oil market did not have an observable effect on the exchange rate.

Pemex

Despite the fact that in the session the depreciation of the peso was related to external factors, the greater perception of risk in Mexico continues to be a factor that increases the propensity of the Mexican peso to depreciate.

Today morning, Pemex CEO Octavio Romero said that the federal government will assume the debt payments of the oil company, without giving additional details on the extension of the support or its duration.

Although in the media it was published that Octavio Romero said that this measure would be positive for the Treasury, in reality it represents greater pressure on public finances.

If it materializes, it would imply that a quarter of GDP growth would go to pay Pemex’s debt.

It is worth mentioning that debt payments from March to December 2021 amount to 149,843 million pesos, equivalent to 0.65% of GDP in 2020.

For all of 2022, debt payments amount to 229,366 million pesos or 0.99% of 2020 GDP.

In the session, the euro touched a low of 1.1962 and a high of 1.2067 dollars per euro.

Finally, the euro peso touched a minimum of 24.9835 and a maximum of 25.3285 pesos per euro.

At the close, interbank prices for sale stood at 21.1313 pesos per dollar, 1.3895 dollars per pound and 1.1971 dollars per euro.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE