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The peso loses against the dollar after 6-day rise

The peso begins the session with a depreciation of 0.36% or 7.2 cents, trading around 19.89 pesos per dollar, after the exchange rate hit a new low since January of 19.7850 pesos overnight.

It is worth mentioning that it is the first depreciation of the peso after six consecutive sessions on the rise.

The depreciation of the peso occurs alongside other currencies of emerging economies, such as the South African rand, which lost 0.46% and the Brazilian real, which lost 0.35%, due to a deterioration in risk appetite in global financial markets.

The dollar weighted index remains stable, although it shows a minimum advance of 0.02%, the first since Friday, April 9.

Losses are also observed for assets considered riskier, such as the capital market.

The peso

In Asia, Japan‘s Nikkei 225 Index closed 1.97% down, while in Europe, London’s FTSE 100 lost 1.23% and Germany‘s DAX fell 0.94%, with most indices losing 1.2 on average. percent.

In the United States, the downward correction is likely to extend for a second consecutive day, as the futures market shows that at the open the main indices are down around 0.30 percent.

The losses are associated with caution prior to the publication of quarterly results in the United States, as no relevant economic indicators will be published today. Among the companies that will publish their results are Johnson & Johnson, Procter & Gamble and Netflix.

Among the companies with the greatest drops in recent days, transportation services stand out, so additional setbacks could be observed during the session due to the global growth in cases of coronavirus.

Until yesterday, the 7-day average of new global cases reached a historical level of 759,843 confirmed daily, about 25% of these cases have been registered in India, although several countries globally are once again considering mobility restrictions.

In Osaka, Japan, a new high of Covid19 cases was recorded, so it is likely that a state of emergency will be declared during the week. Other countries with accelerated growth in the number of cases, despite the vaccination process, are Uruguay, Turkey and France.

The oil

In the commodities market, the WTI is trading around 63.62 dollars per barrel, showing an advance of 0.38%, as the weakening of the dollar in previous days tends to strengthen the demand for raw materials.

It is important to remember that a year ago, WTI prices were in negative territory, taking the price to an all-time low of -40.32 dollars per barrel.

Given this, the WTI shows an increase of 269.07% in the last 12 months, while in 2021 it accumulates an increase of 31.13 percent.

For its part, corn began the session with a price increase of 0.99%, trading at $ 5.86 per bushel. In 2021, corn registers an increase in its price of 20.87%, while in the last 12 months the grain shows an increase of 81.92 percent.

Concerns remain that adverse weather threatens supply of the grain, while demand remains robust.

Brazil’s second corn crop is at risk from droughts in its producing region, while the United States is expecting a cold snap in the Midwest, with freeze warnings, slowing down early planting in the belt. corn and soy.

Hydrocarbons Law and the peso

Regarding relevant events in Mexico, it is important to mention that last night the minutes of the Hydrocarbons Law were approved in senate committees, which will now be sent to plenary session for discussion and probable approval.

The exchange rate has not been affected by this news, despite the fact that the reform of the Hydrocarbons Law has the potential to reduce direct foreign investment in Mexico, slows economic growth and puts the commercial relationship with the US at risk.

During the session, the exchange rate is expected to trade between 19.79 and 19.99 pesos per dollar. The euro starts the session with an appreciation of 0.02%, trading at 1.2040 dollars per euro, while the pound loses 0.24% and is trading at 1.3952 dollars per pound.

Money market and debt

In the United States, the 10-year Treasury yield remains unchanged at 1.60%, while in Mexico the 10-year M bond yield remains unchanged at 6.60 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 1.77% 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 19.9523 at 1 month, 20.2925 at 6 months and 20.7288 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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