The peso gains 17.2 cents against the dollar for the week

The Mexican peso closed the week with an appreciation of 0.83% or 17.2 cents, trading around 20.52 pesos per dollar, with the exchange rate touching a minimum of 20.2829 and a maximum of 20.8267 pesos per dollar.

Most of the appreciation was concentrated in Wednesday’s session in the minutes after the Federal Reserve‘s monetary policy announcement, after the Open Market Operations Committee adjusted its forecasts for economic growth and inflation upwards, but maintained unchanged your expectation for the interest rate which will probably continue between 0 and 0.25% until 2023.

Likewise, the Fed president pointed out at a press conference that it is still too early to consider a reduction in monetary easing or adopt a less flexible monetary stance, which allowed the exchange rate to touch the weekly minimum of 20.2829 pesos per dollar. .

Despite the fact that the peso gained ground for the second consecutive week, the downward correction seems to have reached a limit at the support of 20.30 pesos per dollar, which was respected four times.

For its part, the dollar weighted index halted its downward correction, advancing 0.08% in the week after losing 0.61% in the previous week.

It is important to note that Treasury bond rate increases continued, raising the likelihood of a further strengthening of the dollar during the following week.

The peso

The yield rate on the 10-year Treasury bonds registered a weekly increase of 10.3 basis points, reaching 1.73%, reaching a maximum of 1.7526% not seen since January 24, 2020.

This rate has risen for seven consecutive weeks, accumulating an increase of 66.3 basis points, due to speculation that inflationary pressures could be observed in the United States.

In the foreign exchange market, a mixed performance was observed, with an appreciation mainly for the currencies of emerging economies.

The most appreciated currency was the Turkish lira, which advanced 4.83%, after the Central Bank of Turkey raised the one-week repo interest rate by 200 basis points, double that expected by the market.

The second most appreciated currency was the South African rand with 1.60%, followed by the Brazilian real with 1.33% and the Mexican peso with 0.83 percent.

It is important to note that, in the Chicago futures market, speculative positions turned against the peso significantly in the week between Wednesday 10 and Tuesday 16 March.

The net speculative positions awaiting a depreciation of the peso were located at 29,457 contracts, each of 500 thousand pesos.

This was due to the fact that positions in favor of the peso fell by 10,212 contracts, the largest drop since the last week of September 2020, while short positions, awaiting a depreciation of the peso, rose by 21,097 contracts, the largest increase since mid-December 2020.

This raises the propensity of the peso to lose ground against the dollar.

The pound and the euro

On the week, the euro hit a low of 1.1874 and a high of 1.1989 dollars per euro. Finally, the euro peso touched a minimum of 24.1421 and a maximum of 24.8442 pesos per euro.

At the close, the interbank quotes for sale stood at 20.5230 pesos per dollar, 1.3867 dollars per pound and 1.1907 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE