Background on the Mexican Peso and its Recent Performance
The Mexican peso experienced a slight decline against the US dollar on Wednesday, following a positive trend and a weakened dollar that pushed its price to a 17-month high. The peso’s retreat comes as the dollar strengthens, with investors closely watching the Federal Reserve (Fed).
Key Market Developments
- The Mexican peso closed at 18.0154 units per dollar, marking a decrease of 6.45 centavos (0.26%) compared to the previous day’s close of 17.9509 units, according to official data from Banco de México (Banxico).
- The dollar’s movement ranged from a high of 18.0499 units to a low of 17.9572 units.
- The Dollar Index (DXY) from the Intercontinental Exchange, which measures the dollar against a basket of six reference currencies, increased by 0.17% to 98.39 points.
Fed’s Monetary Policy and its Impact on the Peso
Earlier in the day, Fed’s Christopher Waller stated that there is still room for further interest rate cuts due to concerns about the weakening labor market, following three consecutive adjustments.
A divided Fed recently reduced its rate but clarified that it is unlikely for the money market to continue falling in the short term. The market anticipates speeches from John Williams, president of the Fed of New York, and Raphael Bostic, president of the Fed of Atlanta.
Local Policy and its Influence on the Peso
Investors are awaiting tomorrow’s final monetary policy decision by Banxico for the year. Analysts predict a 12th consecutive 25-basis-point reduction in the interest rate, placing it at a level of 7%.
Meanwhile, Juan Carlos Cruz, CEO of México Financiero, noted that the peso continues to trade with apathy and low volume, oscillating around the 18-peso level, which remains a primary resistance point. He added that minor interest and small trading volumes create significant liquidity gaps.
Key Questions and Answers
- What is the current status of the Mexican peso against the US dollar? The Mexican peso slightly retreated on Wednesday, closing at 18.0154 units per dollar, after reaching a 17-month high due to a positive trend and a weakened dollar.
- What factors are influencing the peso’s movement? The peso is being affected by uncertainty surrounding the Fed’s future interest rate decisions and anticipation of Banxico’s local policy announcement.
- What are the recent developments in the Fed’s monetary policy? The Fed has recently cut its rate but suggested it is unlikely to lower the money market further in the short term. Investors are awaiting speeches from Fed officials, including John Williams and Raphael Bostic.
- What is expected from Banxico’s monetary policy decision? Analysts predict a 12th consecutive 25-basis-point reduction in the interest rate, placing it at a level of 7%.
