Overview of Currency Performance
The Mexican peso appreciated against the US dollar this week, driven by the Federal Reserve’s (Fed) monetary policy announcement. The Fed decided to cut interest rates by 25 basis points, aligning with market expectations.
However, the dollar experienced an upward correction towards week’s end, trimming the peso’s gains.
According to data from Banco de México (Banxico), the peso closed on Friday at 18.3878 units per dollar, a mere 0.04% or 0.73 centavos depreciation. With this outcome, Mexico’s national currency recorded its second consecutive day of losses.
On a weekly basis, the Mexican peso appreciated by 0.33%, marking two weeks of gains against the greenback. Year-to-date, the currency has appreciated by 11.95%.
The Intercontinental Exchange’s Dollar Index (DXY), which measures the US dollar against a basket of six currencies, closed with a slight 0.09% increase to 97.64 points.
Weekly Performance of Major Currencies
- The Colombian peso appreciated by 0.83%
- The Brazilian real gained 0.56%
- The Canadian dollar rose by 0.43%
- The Czech crown increased by 0.30%
- The South African rand gained 0.27%
- The Hungarian forint appreciated by 0.26%
The most depreciated currencies in the week were the New Zealand dollar (-1.62%), the Argentine peso (-1.44%), the Indonesian rupiah (-1.38%), the Swedish krona (-1.02%), the Norwegian krone (-0.84%), and the Australian dollar (-0.84%).
Expert Analysis
Gabriela Siller, Director of Analysis at Banco Base, stated: “The peso’s appreciation was concentrated in sessions before the Federal Reserve’s monetary policy announcement, which on Wednesday, 17th, decided to cut the interest rate by 25 basis points in line with market expectations.”
“Although the Fed now considers that interest rate cuts could total 50 basis points before the year ends, this scenario was already priced in by the market,” she explained.
Jorge Gordillo Arias, Director of Bursátil Analysis at CiBanco, added: “In September, the dollar tends to strengthen against its main counterparts, while the Mexican peso tends to depreciate. Therefore, it cannot be ruled out that the exchange rate will continue to face upward pressure.”
“Investors still anticipate more moderate interest rate cuts in the US, coupled with soft economic growth and controlled inflation. However, with an overbought market, a minor adjustment or short-term correction is not ruled out,” he said.
Bullish Bets on the Peso Continue to Rise
Net speculative long positions or bets favoring the Mexican peso have maintained their winning streak for a fourth consecutive week in the Chicago Mercantile Exchange (CME).
During the week, net speculative positions on the Mexican peso increased to 78,000 contracts from 73,700 the previous week, a 5.8% or 3,400 increase.
Moreover, bullish bets on the peso have risen for four weeks straight, accumulating a total increase of 20.93% or 13,500 contracts.
Felipe Mendoza, analyst of Financial Markets at ATFX LATAM, commented: “The Federal Reserve’s decision to cut its benchmark rate by 25 basis points met the widely anticipated script by markets.”
