He Mexican peso was seen in front of American dollar this Wednesday. The local currency advanced, after two consecutive days with losses, due to the weakening of the greenback after knowing a slowdown in the US inflation in March.
He exchange rate ended this day at the level of 18.0943 units per dollar. Against the official close of 18.1865 pesos yesterday, the movement meant an improvement of 9.22 cents or 51% for the peso, with official data from the Bank of Mexico (Banxico).
Less pressure on prices
US inflation slowed to 5% year-on-year in March, the Labor Department reported earlier. The record was at its lowest level in almost two years, according to what was observed in the Consumer Price Index (CPI).
“The local currency was favored by good inflation figures for March in the United States that support the expectation that the end of the upward cycle of the Fed’s benchmark interest rate is near,” Monex Grupo Financiero explained in a note .
Minutes after knowing the data, the exchange rate touched a minimum of 18.0211 pesos, the best level since Tuesday of last week. He Dollar Index (DXY), which went against the dollar against six benchmark currencies, was down 0.64% to a point level.
Rate hike bet
Later, market participants received the minutes of the March meeting of the Federal Reserve (Fed). In them, the central bank reported that several of its officials considered the possibility of suspending rate increases in March.
The doubts were generated in a context of uncertainty due to the bankruptcies of two US regional banks. Although there were doubts about whether they could put more pressure on the sector, the priority of fighting high inflation finally prevailed.
But this time the possibility of the central bank pausing rate hikes is accompanied by inflation figures. The Fed Watch tool shows a 69% probability that the Fed will raise its rate 25 basis points, against almost 72% yesterday.
A solid support level
This Wednesday the advance of the peso was caused mainly by the weakness of the dollar, given a decrease in bond yields due to the possibility that the central bank could soon end the current cycle of rate increases.
However, “various brokerages are beginning to think that most emerging markets have reached or are close to reaching the end of their rate hike cycle,” one of the factors that has driven the peso in 2023.
“The peso continues to test the support of 18 units. Inflation in the United States subtracted energy from the dollar and allowed the region’s currencies to advance. The range to observe will continue to be between 18:00 and 18:30,” said Juan Carlos Cruz, a professor at the EBC.
