Mexican peso is shaping up to close the week with gains despite market volatility

Mexican peso is shaping up to close the week with gains despite market volatility

Mexico City – The Mexican peso (MXN: CUR) is shaping up to close the week with a positive balance of more than 1.0% despite the volatility recorded by the market.

The local currency showed an appreciation of 0.18% on Friday, May 20, trading at MXN$19.8732 per dollar (Mexico City 11:08 am). During the session it touched a low of $19.9614 and a high of $19.8215.

The Mexican currency accumulates a positive appreciation of 1.48%according to data from Bloomberg. It is the third week that the Mexican peso closes in positive territory despite the fact that the dollar index, the benchmark that measures the value of the US currency against a basket of currencies, remained at new year-on-year highs seen in two decades.

On May 13, the dollar index touched 105,065 points during the day. So far this week, it registers a contraction of 1.45%, according to data from Bloomberg.

These are two elements that encouraged the increase in the Mexican peso. On the one hand, the monetary policy implemented by the Bank of Mexico that specified a 50 base point rise in the reference rate and showed a trend hawk, according to the deputy director of Analysis at Monex, Janneth Quiroz.

The expectation is generated that the reference rate will continue to increase and it is reflected in the statements made by Banxico’s deputy governor, Jonathan Heath, which suggest that the rate could increase by 75 basis points if inflation continues to rise.

The other element is related to the relaxation of the restriction measures in China, after having presented zero tolerance for Covid-19 infections. “It would provide a strong demand for raw materials by the Asian country and would have a positive impact on the export of some Latin American countries,” said the strategist at Monex.

The Brazilian real (BRL:CUR) showed the best weekly performance in the region with an appreciation of 5.20%, followed by the Chilean peso (CLP:CUR) +3.58%, Colombian peso (COP:CUR) +3, 37% and the Peruvian sol (PEN:CUR) +0.88%, according to data from Bloomberg.

The People’s Bank of China announced a 15 basis point cut in the benchmark rate. It went from 4.60% to 4.45%, a new record and higher than anticipated, according to Banorte analysts. The measure seeks to stimulate demand for mortgages and loans in the face of a weak sector and with the persistent risks of confinements.

In addition, it maintains the opening plans in Shanghai despite the new infections that were registered outside the confinement zone.

However, the outlook looks uncertain. The economic information of various countries has yet to be released and, with it, the monetary policy decisions of the central banks.

“The market is expected to remain cautious in the coming weeks, waiting for relevant economic information and in particular data that sheds light on the future of monetary policy in the world’s main economies,” the director of Economic Analysis said in a report. and Finance at Banco BASE, Gabriela Siller.

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