Introduction
Last week, between January 9 and 16, the net speculative positions favoring the Mexican peso fell by 5.22% in the Chicago Mercantile Exchange (CME).
Investor Doubts and Position Adjustments
Chicago investors are uncertain about whether the peso will continue to appreciate against the dollar, which is reflected in their speculative positions on the Mexican currency. This recent decline stems from uncertainty caused by U.S. military operations in Venezuela and Donald Trump’s threats of potential intervention in Mexico.
Position Details
During the week of January 9-16, net speculative positions favoring the Mexican peso in the CME stood at 103,600 contracts, a decrease of 5,700 from the previous week’s 109,300, representing a 5.22% drop.
Expert Analysis
Janneth Quiroz, director of Monex Casa de Bolsa’s Analysis, explained that the downward movement was primarily due to factors such as “cautious sentiment stemming from U.S. military operations in Venezuela, Trump’s threats of intervention in Mexico, and local and U.S. economic data.”
Quiroz further mentioned that “amidst latent geopolitical tensions following the Venezuelan military operation, Trump threatened security measures in Mexico, increasing investor nervousness. However, days later, President Claudia Sheinbaum held a phone conversation with Trump focusing on security issues, which mitigated the likelihood of escalation, pending a bilateral security meeting on January 22 and 23.”
Quiroz stated that the correction in long peso positions aligns with an unfavorable external environment, rather than a structural factor that could alter the favorable outlook for the currency in the short term. The movement can be attributed to profit-taking.
Mexican Peso’s Recent Performance
Peso has its best week since April 2015
The peso appreciated against the dollar and had its best week since late April 2015.
According to Bank of Mexico (Banxico) data, the national currency closed at 17.6465 pesos per dollar, representing a 0.02% or 0.34-cent appreciation on Friday, accumulating a 1.88% gain over six consecutive weeks of advances against the dollar.
In its weekly comparison, the currency ended with two weeks of consecutive depreciation but managed to appreciate by 1.87%, the highest since the week ending April 24, 2015, when it was 2.70%.
In 2016, the currency aims for a 2.01% appreciation.
The Intercontinental Exchange’s dollar index, which compares the U.S. currency to six other currencies, rose 0.02% to 99.36 points in its weekly comparison.
Among the major currency pairs, the Argentine peso appreciated by 2.40%, the Russian ruble by 1.27%, the Chilean peso by 0.84%, the South African rand by 0.53%, and the Colombian peso by 0.50% during the week.
On the other hand, the South Korean won depreciated by 0.99%, the Indian rupee by 0.78%, the Polish zloty by 0.49%, the Turkish lira by 0.47%, the Indonesian rupiah by 0.40%, and the euro by 0.32%.
Market Analyst Perspective
Diego Albuja, ATFX LATAM’s market analyst, confirmed that “the close indicates the peso continues to hold up well, mainly because there was no significant shock on Friday that would push the market to seek refuge in dollars. Hence, the exchange rate remained under control, and the dollar failed to gain strength decisively.”
Albuja added that “this is positive because the foreign exchange market is operating more balanced. In the short term, the exchange rate could remain stable within a range as markets continue to monitor the global dollar direction and any changes in interest rate expectations.”
He anticipates that upcoming macro data and any new signals on U.S. interest rates will be the next catalysts.
