Mexican Peso Advances Against Weakening US Dollar
The Mexican peso appreciated against the US dollar on Thursday, as markets remained vigilant regarding the ongoing trade conflict between the United States and China.
The exchange rate concluded the day at 19.5809 pesos per dollar, marking a gain of 6.93 centavos or 0.35% from the previous day’s closing rate of 19.6502 pesos, according to official data from Mexico’s central bank, Banco de México (Banxico).
The dollar’s price ranged from a high of 19.6407 pesos to a low of 19.5611 pesos, while the Dollar Index (DXY) from the Intercontinental Exchange, which compares the dollar to a basket of six reference currencies, fell by 0.62% to 99.29 points.
US and China Make No Progress
Following the US government’s encouragement of hopes for reduced tariffs on China to ease trade tensions, Treasury Secretary Scott Besson stated that there would be no unilateral measure to cut tariffs.
China’s Commerce Ministry spokesperson, He Yadong, said that “all assertions about progress in bilateral talks should be dismissed,” and China demanded that if the US wants to negotiate, it must first remove all unilateral tariffs.
President Donald Trump refuted the Chinese claims that the two economic powers have not held conversations to alleviate the ongoing trade war, stating that there were meetings earlier in the day.
Economic Figures
Markets also processed US economic figures: new weekly jobless benefit applications increased last week as expected, while durable goods orders rose in March beyond expectations.
On the local front, INEGI reported that general inflation unexpectedly accelerated to 3.96% in the first half of April but remained within the official target range, leaving no changes to expectations that Banxico will continue lowering its key interest rate.
“The peso benefits from the weakening dollar, as investors assess the latest inflation figures in Mexico. The currency extends its weekly advance, remaining within a narrow range due to the lack of developments in the trade front,” explained Monex.
Awaiting GDP Data
Locally, President Claudia Sheinbaum dismissed today the notion that Mexico may have fallen into a technical recession in Q1, as firms like Citi suggested. The INEGI is expected to publish the GDP for March next week.
The peso continues its appreciation, having traded above 21 pesos at the beginning of the month: “It’s hard to say if it will keep appreciating, as many issues remain ahead,” Humberto Calzada, chief economist at Rankia Latin America, told Reuters.
“For now, markets are anticipating a weak local GDP figure, though if we see a steeper-than-expected decline, there could be potential for the dollar’s price to rebound towards 19.50 or even 20 (pesos per dollar),” Calzada added.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso has gained ground against the weakening US dollar, closing at 19.5809 pesos per dollar.
- Why are markets watching the US-China trade tensions? Markets remain cautious as there is no progress in resolving the ongoing trade conflict between the United States and China.
- What are the recent economic figures from the US? New weekly jobless benefit applications increased as expected, and durable goods orders rose in March beyond expectations.
- What is the current inflation situation in Mexico? General inflation unexpectedly accelerated to 3.96% in the first half of April but stayed within the official target range.
- Is Mexico in a technical recession? President Claudia Sheinbaum dismissed the notion that Mexico may have fallen into a technical recession in Q1.
- What are the expectations for the Mexican peso’s future performance? The peso’s appreciation is expected to continue, though its future trajectory remains uncertain due to various factors.
