Background on the Mexican Economy and Currency
The Mexican peso has experienced a two-week decline against the US dollar, following weakening US labor market data that increased expectations of potential Federal Reserve interest rate cuts. This trend has been observed despite the Mexican peso’s 10.38% appreciation this year.
Weekly Performance and Market Analysis
According to Banco de México (Banxico) data, the Mexican peso depreciated by 0.14% or 2.59 centavos, reaching 18.7143 pesos per dollar on Friday’s trading session.
On a weekly basis, the Mexican currency has depreciated by 0.28%, marking its second consecutive week of decline against the greenback. Meanwhile, the Intercontinental Exchange’s Dollar Index (DXY), which compares the US dollar to a basket of six currencies, remained unchanged at 97.67 points.
Among other currencies, the Argentine peso (-1.53%), Canadian dollar (-0.63%), Russian ruble (-0.61%), Mexican peso (-0.28%), Turkish lira (-0.22%), and Japanese yen (-0.21%) experienced the most significant depreciation.
Conversely, the Colombian peso (+1.51%), Hungarian forint (+1.27%), Swedish krona (+0.73%), Polish zloty (+0.64%), Czech koruna (+0.58%), and South African rand (+0.41%) showed the most appreciation.
Expert Opinions and Future Outlook
Felipe Mendoza, an analyst at ATFX LATAM, stated that the Mexican peso closed the week supported by a weakening US dollar and robust trade balance performance. However, internal challenges (such as fiscal changes) and external factors (like the upcoming T-MEC renegotiation) pose threats.
Mendoza anticipates that the peso will remain within a range of 18.55 to 18.85 pesos per dollar in the short term, with CFTC data and Fed signals being crucial determinants of its immediate trajectory.
Monex Casa de Bolsa analysts explained that the peso fluctuated between 18.69 and 18.79 pesos per dollar during the overnight session, considering the dollar’s weakness and anticipating a light economic agenda for the week.
Increased Confidence in Mexican Peso
For the second consecutive week, Mexican peso futures contracts in the Chicago Mercantile Exchange (CME) have shown increased confidence and bet on local currency appreciation against the US dollar.
As per CME data, by the close of Friday, September 5, the number of traded contracts stood at 73,000, marking a 5.79% or 4,000 contract increase compared to the previous week, as reported by Investing.
This surge in speculative interest reflects how international investors have found reasons to increase their exposure to the Mexican peso, despite external volatility and internal challenges faced by Mexico, according to Mendoza.
With a weakened US dollar and falling Treasury bond yields, investors sought refuge in liquid emerging market currencies, and the Mexican peso once again took center stage.
Key Questions and Answers
- What is the current trend of the Mexican peso against the US dollar? The Mexican peso has experienced a two-week decline against the US dollar.
- What factors are contributing to this trend? Weakening US labor market data and expectations of potential Federal Reserve interest rate cuts are driving this trend.
- How has the Mexican peso performed year-to-date? The Mexican peso has appreciated by 10.38% against the US dollar this year.
- What are the expert opinions on the Mexican peso’s future outlook? Experts anticipate the peso will remain within a range of 18.55 to 18.85 pesos per dollar in the short term, with CFTC data and Fed signals being crucial determinants.
- What recent developments have increased confidence in the Mexican peso? Mexican peso futures contracts in the CME have shown increased confidence and bet on local currency appreciation against the US dollar for the second consecutive week.
