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The peso is the most appreciated currency against the dollar

The peso starts the session with an appreciation of 0.36% or 7.1 cents, trading around 19.90 pesos per dollar, with the exchange rate touching a minimum of 19.8910 and a maximum of 19.9951 pesos per dollar, ranking as the most appreciated currency in the wide basket of main crosses and advancing in line with other currencies of emerging economies or producers of raw materials, such as the Russian ruble (+ 0.26%), the South African rand (+ 0.14%), the New Zealand dollar (+ 0.11%) and the Canadian dollar (+0.06).

This morning’s move is just the result of an adjustment to the losses from Tuesday’s session. It should be noted that, in the exchange market, the dollar weighted index advances 0.09% against its main crosses, indicating that the peso, together with a small group of currencies, is moving in the opposite direction of the dollar, something that has not happened since Monday, April 5.

In global financial markets there is still caution, mainly in the capital market, since in Europe the main indices partially recover from Tuesday’s losses, advancing on average 0.70%, while in the United States the futures market shows mixed results, with the Dow Jones advancing just 0.03% and the Nasdaq losing 0.21%, as companies in the technology sector have been affected by Netflix’s quarterly results, which reported the inclusion of only 3.98 new subscribers in the first quarter, below 6 million expected and with a prediction of just 1 million subscribers in the second quarter.

It should be remembered that several companies in the technology sector benefited from the pandemic and the need for people to stay at home, a trend that is being reversed with the vaccination process, mainly in the United States.

The peso

Commodity markets show a mixed performance, with significant losses for oil prices. The WTI fell 1.63%, trading at 61.64 dollars a barrel.

The losses in the price are due to the fact that the Covid19 pandemic continues to advance, mainly in Asia.

Only India, which is the third largest buyer of oil globally, registered about 295,000 new coronavirus infections and 2,000 deaths on Wednesday, 10 times more than the average daily deaths registered a month ago.

The currencies of commodity-producing countries have not been affected this morning by the drop in the price of oil.

However, if the fall in crude prices persists, it is not ruled out that some currencies will register falls, as happened in the session on Tuesday.

Canadian dollar

The Central Bank of Canada has a monetary policy announcement at 9:00 am (CT), the bank is expected to reduce its bond purchase program from 4 billion Canadian dollars to 3 billion, due to positive economic indicators. that have been published.

If confirmed, it is likely that a significant appreciation of the Canadian dollar will be observed, which this morning advances only 0.06% and trades near 1.26 Canadian dollars per dollar.

Labor market and the peso

For its part, in Mexico, yesterday the Senate of the Republic approved the reform in the matter of outsourcing regulation, thus modifying article 123 of the Constitution regarding the Labor Law.

With the modifications, companies will be prohibited from subcontracting employees who are part of the company’s core economic activity.

This means that companies will only be able to use this model if they require a specialized position.

Companies that currently have outsourced employees will have three months to do a direct hire.

The approval of this reform is expected to slow down the labor market recovery process, which is already slow after the lowest formal job creation since 2013 was recorded in the first quarter.

During the session, the exchange rate is expected to trade between 19.82 and 19.99 pesos per dollar.

The euro starts the session with a depreciation of 0.23%, trading at 1.2008 dollars per euro, while the pound loses 0.11% and is trading at 1.3921 dollars per pound.

Money market and debt

In the United States, the 10-year Treasury yield remains unchanged at 1.57%, while in Mexico the 10-year M bond yield remains unchanged at 6.71 percent.

Derivatives market and the peso

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 1.45% 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 19.9653 at 1 month, 20.3170 at 6 months and 20.7615 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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