The peso gains against the dollar in the week: it is trading at 19.87

The peso closed the week with an appreciation of 0.25% or 4.9 cents, trading around 19.87 pesos per dollar, with the exchange rate touching a low of 19.7542 pesos per dollar, a level not seen since January 22.

It should be remembered that the minimum of the exchange rate in the year 19.5494 was reached on January 21.

The weekly volatility of the exchange rate was 12.58%, the highest since the last week of March (seven weeks ago).

The performance of the exchange rate during the week is divided into two parts. In the first half of the week, the exchange rate faced moderate upward pressure, mainly in the session on Wednesday, after the United States inflation for April was published, at an annual rate of 4.2%, considerably above the the market estimate of 3.6 percent.

This led to speculation that inflationary pressures could be greater than anticipated and force the Federal Reserve to adopt a less flexible stance.

Between the sessions of Monday and Wednesday, the weighted index of the dollar advanced 0.64%.

Due to this, the exchange rate reached a maximum in the week of 20.2135 pesos per dollar.

The mexican peso

In the second part of the week, that is, during the last two sessions, the exchange rate gained ground mainly due to two factors:

First factor

A corrective movement of the foreign exchange market was observed, with the US dollar losing 0.51% between the sessions on Thursday and Friday, according to the weighted index.

This is due to the fact that economic indicators of retail sales and industrial activity for the month of April show that the economic recovery slowed down.

Likewise, the prices of some raw materials, mainly energy, registered gains on Friday, closing the week higher.

This allowed that in the last two days of the week among the most appreciated currencies were those of countries producing raw materials, such as the Norwegian krone (+ 1.40%), the Colombian peso (+ 1.15%), the Chilean peso (+ 0.99%), the Russian ruble (+ 0.94%), the Australian dollar (+ 0.71%) and the Brazilian real (+0.69 percent).

Second factor

Banco de México changed its language in its monetary policy announcement on Thursday, May 13, noting that the balance of risks for inflation is biased upward, something that had not been mentioned for two years.

The caution of the Governing Board sends the signal that interest rate cuts will probably not resume and will remain at 4% for the rest of the year.

The Mexican peso was the most appreciated currency in the last two days of the week, advancing 1.46% in this period.

Elections in South America

In the wide basket of main crosses, the most appreciated currencies in the week were the Peruvian sol with 3.50%, driven by the decision of the central bank to keep the interest rate unchanged and because the latest polls show the presidential candidate of left with a lead of just 2 percentage points, which gives some reassurance to the markets.

The second round in Peru‘s presidential elections will take place on June 6.

The second most appreciated currency in the week was the Colombian peso with 1.60%, followed by the Hungarian forint with 0.82% and the pound sterling with 0.81 percent.

Likewise, the Mexican peso ranked as the eighth most appreciated currency.

On balance, the dollar weighted index closed with a weekly advance of 0.13 percent.

During the week the euro touched a minimum of 1.2052 and a maximum of 1.2182 dollars per euro.

For its part, the euro peso touched a minimum of 23.9714 and a maximum of 24.3923 pesos per euro.

At the closing, the interbank quotes for sale stood at 19.8680 pesos per dollar, 1.4098 dollars per pound and 1.2143 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE