Pressures against the Mexican peso intensify

The exchange rate closed at 21.2275 pesos per dollar this Tuesday, with the peso joining its fourth consecutive day of depreciation against the dollar and also its worst level since last March.

Yesterday the peso had a loss of 1.17% or 24.54 cents compared to Monday’s closing of 20.9821 units per greenback, according to official information from the Bank of Mexico.

However, the Mexican currency depreciated almost 30 cents when it touched 21.2819 pesos per dollar around noon, and subsequently moderated its depreciation against the greenback.

In four consecutive sessions, the currency added 55.8 cents or 2.68% of depreciation against the dollar, and so far in 2021 its loss is 6.40 percent.

The strengthening of the dollar continues to be supported by the expectation of continuity of the monetary policy of the United States, after on Monday the president of that country, Joe Biden, nominated Jerome Powell for a second term at the head of the Federal Reserve (Fed) .

“A greater perception of risk continues to be observed in global financial markets, mainly due to the resurgence of coronavirus cases, mainly in Europe, which threatens the implementation of new containment measures towards the end of the year, mainly in Germany, the largest economy in the region, ”explained Gabriela Siller, director of Economic Analysis at Banco Base.

From a technical point of view, the specialist explained, at levels above 21 pesos per dollar, the exchange rate could show greater volatility and quickly approach the maximum in the year of 21.6357 pesos reached on March 8.

Near highs

The dollar index, which compares the greenback to a basket of six benchmark currencies, remained near its 16-month high on Tuesday.

The foregoing, after the Fed chairman was nominated for a second four-year term, reinforcing market expectations that interest rates in the neighboring northern country will rise sometime in 2022.

“Markets are taking advantage of every moment of dollar strength that they can get in this environment, which is visible in business after Powell’s expected re-nomination,” said Ima Sammani, Forex Market Analyst at Monex Europe.

Alejandro Padilla, general director of Economic and Financial Analysis at Banorte, said that “the deterioration in investor sentiment in the face of the advances of Covid-19, giving additional impulse to the strengthening of the dollar, will limit a substantial respite for the Mexican currency, therefore less in the short term ”.

Generates uncertainty

Relevant news in Mexico is the confirmation that President Andrés Manuel López Obrador withdrew Arturo Herrera’s nomination to occupy the position of governor of the Bank of Mexico.

According to the coordinator of Morena in the Senate, Ricardo Monreal, the possibility that the former Secretary of the Treasury will be confirmed in the next few days is not ruled out or another nomination will be announced.

“A nomination that does not send a signal of respect for the independence of Banco de México could generate uncertainty in the financial markets, given a greater perception of risk over Mexico, which would put additional pressure on the exchange rate and interest rates of government values, ”Gabriela Siller commented.

Until 5:00 in the afternoon, Mexico City time, the exchange rate operated at 21.1972 pesos per dollar, a slight appreciation of 0.14% after the benchmark closing of the Bank.

Arturo Herrera confirmed through his social networks that: “indeed the president informed me a week ago that he had decided to reconsider my appointment as head of the Bank of Mexico.”

The Mexican currency reached a level of 21.2665 units per dollar at 8:00 at night, a depreciation of 0.18% or 3.90 cents compared to the closing of Banxico on Tuesday. (With information from Agencies)

ariel.mendez@eleconomista.mx

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