Overview of the Mexican Peso’s Movement
The Mexican peso slightly retreated against the dollar during mid-week trading after reaching its best level in two weeks, supported by a general weakening of the greenback.
The spot exchange rate closed at 18.3686 pesos per dollar, marking a decrease of 5.39 centavos or 0.29% compared to the official closing rate of 18.3147 pesos from the previous day, according to data from Banco de México (Banxico).
The dollar’s price fluctuated between a high of 18.3794 pesos and a low of 18.2400 pesos. The Dollar Index (DXY) from the Intercontinental Exchange, which compares the US dollar to six reference currencies, fell by 0.06% to 97.76.
US Government Shutdown Continues
The dollar weakened as the partial government shutdown in the United States commenced at the start of Wednesday, with hopes that Democrats and Republicans in Congress could reach a spending agreement.
In the meantime, many government activities have been halted, including statistical offices. Traders anticipate an agreement before Friday, when the crucial non-farm payroll report is expected to be released.
Should the shutdown persist, it could affect other assets like the peso, as “risk aversion might increase, causing capital outflows from emerging markets,” warned Felipe Barragán, Pepperstone’s research market strategist.
Weak US Data Releases
ADP, a payroll processor in the United States, published its private sector employment data, which showed a decrease of 32,000 jobs in September. Economists surveyed by Dow Jones had forecasted an increase of 45,000 positions.
Following the release of the disappointing ADP employment data, the exchange rate gained momentum to hit a low of 18.24 before rebounding to 18.38. The highest trading volume of the week occurred at 18.34,” noted Juan Carlos Cruz, CEO of México Financiero.
With underwhelming data and amidst the activity halt, traders expect official employment figures to be revealed on Friday, further clarifying bets on the Federal Reserve’s interest rate and potential additional cuts.
Key Questions and Answers
- Q: Why did the Mexican peso retreat against the dollar? A: The Mexican peso slightly retreated due to a general weakening of the US dollar, despite earlier reaching a two-week high.
- Q: What is causing the US dollar’s weakness? A: The dollar is weakening due to the partial government shutdown in the United States and expectations of a spending agreement between Democrats and Republicans.
- Q: How might the US government shutdown impact the Mexican peso? A: Should the shutdown continue, it could lead to increased risk aversion and capital outflows from emerging markets, affecting the Mexican peso.
- Q: What were the recent US employment data releases? A: The ADP payroll processor reported a decrease of 32,000 jobs in September, falling short of economists’ expectations for a 45,000 increase.
- Q: How are traders positioning themselves regarding the Federal Reserve’s interest rate and potential cuts? A: Traders expect further clarification on the Federal Reserve’s interest rate and potential additional cuts following the release of official employment figures on Friday.
