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The peso is trading at 20.04 against the dollar with mixed currency performance

The peso starts the session with little change compared to yesterday’s close, showing a depreciation of 0.01% and trading at close to 20.04 pesos per dollar.

Meanwhile, the broad basket of main crosses shows a mixed performance, without observing a consistent pattern with a greater perception of risk, as they lose currencies from emerging and advanced economies, including safe haven currencies.

This behavior is a consequence of the low liquidity of the market at the end of the week, since yesterday in the United States was Thanksgiving Day and today the US market will operate partially until 12:00 Central Time (CST).

It should be noted that two of the currencies with the greatest losses are the Brazilian real, with a decline of 0.70%, and the Russian ruble, with a decline of 0.77 percent.

This is due to the fact that in the raw material market, energy prices show a fall for the second consecutive day, when the WTI began trading at 45.33 dollars per barrel and with a contraction in its price of 0.85 percent.

Notably, the energy ministers of Saudi Arabia and Russia convened a last-minute meeting of alliance members (OPEC +) before the joint ministerial meeting on November 30 and December 1.

OPEC + is expected to postpone the decline in oil production cuts until at least the first half of 2021, as a result of the resurgence of coronavirus cases.

The Algerian energy minister, current OPEC president, mentioned that it is important to be cautious with the performance of the oil market, because, although the price of WTI has exceeded the level of 45 dollars per barrel, it is still considered “fragile”.

The peso and Covid-19

As for news of the coronavirus, in Japan, Tokyo registered a new record of daily cases of Covid19, reporting 570 infections in the last 24 hours.

Given the increase in cases, the Japanese authorities are discussing the impact that their travel subsidy program is having on the spread of the virus.

The Go To Travel program was a project designed to stimulate the economy, which consists of giving discounts to the Japanese to encourage them to travel to the tourist areas of the country.

In the United States, the State of California reported 14,640 cases Thursday and 104 deaths.

Another news that draws attention is that yesterday afternoon President Donald Trump said in the media that he will concede the victory to Joe Biden until the electoral college confirms his victory. Voters will vote on December 14 and have until December 23 to send their votes to the Senate. At the moment Joe Biden is recognized as the winner with 306 electoral votes, while Trump has 232.

Exports and imports

On the other hand, in Mexico the Trade Balance for October was published, which registered a trade surplus of 6.224 million dollars, being a new record high, according to original figures.

It is worth mentioning that, in the last five months, four trade balances have been historical surpluses, which makes evident a more accelerated recovery in external demand relative to domestic demand.

On the one hand, total exports registered a monthly increase of 4.81%, according to figures adjusted for seasonality, so at the annual rate they show growth of 6.52%, being the first annual advance after eight months of falls and the greatest advance since May 2019.

Total exports were driven by the growth of extractive exports at a monthly rate of 55.38% and manufacturing exports at a rate of 4.82 percent.

Manufacturing exports are already in positive territory in annual terms for the first time since the pandemic began (March), at a rate of 7.29%. Within manufacturing, the rebound in automotive exports stands out, growing 9.56% monthly and 16.60% annually.

Lastly, imports show a slowdown in their recovery, advancing at a monthly rate of 1.26% per month (vs. 5.34% in September), which is why at the annual rate there was a contraction of 10.60 percent.

During the session, the exchange rate is expected to trade between 19.95 and 20.15 pesos per dollar. The euro starts the session with an appreciation of 0.17%, trading at 1.1933 dollars per euro, while the pound shows a depreciation of 0.16% and is trading at 1.3336 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds decreased by 2.6 basis points, at a rate of 0.855%, while in Mexico the yield on the 10-year M bonds increased by 2.4 basis points, to 5.88 percent.

Derivatives market

To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.49% 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 20.1160 at 1 month, 20.4536 at 6 months and 20.9006 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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