The Mexican currency had its largest quarterly appreciation since the last three months of 2020 and ranked as the most resilient currency against the dollar.
In the first three months of 2023, the peso advanced 7.63%, equivalent to 1.49 units per dollar, to end with a price of 18.0201 pesos per greenback, very close to breaking the floor of 18 units.
During operations on Friday, when it closed with a positive variation of 0.42% or 7.56 cents, it reached a minimum of 17.9895 units and a maximum of 18.1245, according to data from the Bank of Mexico (Banxico).
In addition, the peso ended the first quarter of 2023 as the most appreciated currency against the dollar. The second place was for the Chilean peso, with a gain of 6.55%; the Hungarian forint, with 6.10%; and the Brazilian real, with a gain of 4.20 percent.
“Speculation that the Federal Reserve is close to concluding the cycle of interest rate increases (helped the Mexican peso). This expectation was supported by the gradual decrease in inflation, which in February stood at 6.0% annual, accumulating eight consecutive months of decline from the peak of 9.1% in June”, said Gabriela Siller, director of Analysis at Banco Base.
He added that the strength of the peso is also explained by a more restrictive monetary stance by Banxico.
After the increase of 25 base points announced last Thursday, with which the central bank of Mexico left the reference interest rate at 11.25%, the upward risks for inflation persist, so additional increases are not ruled out, he said. saddler.
They bet in favor in Chicago
After three months of betting on the depreciation of the Mexican peso against the dollar, net speculative positions turned in favor of the currency for the third consecutive week on the Chicago Stock Exchange (CME).
Speculator sentiment in Chicago took a turn from the March 8-28 period and now they believe the peso will appreciate against its US counterpart.
This period coincides with the announcement of the Federal Reserve (Fed), when it raised the reference interest rate by 25 base points and gave signs that the terminal rate will reach a level of 5.25% and not 5.50% as anticipated.
For the last weekly data ended on March 28, the record was 49,279 net long contracts or in favor of the peso, each of 500,000 pesos, which reflects a weekly drop of 4.3% compared to the 51,500 contracts of the previous week.
“We see that for the third consecutive week the positions remained net long even as risk aversion increased due to the possibility of a crisis in the banking sector in the United States and even in other parts of the world, with the issue of Credit Suisse and from Deutsche Bank”, said Janneth Quiroz, deputy director of Analysis at Monex Casa de Bolsa.
He added that “the behavior of the peso contracts in Chicago clearly reflects that speculators now have the expectation that the currency will appreciate.”
The specialist explained that this feeling also has to do with the expectation of the next monetary policy decisions of the US central bank, since after the crisis of the regional banks in the United States and other large ones in Europe, the possibility of it continuing to rise decreased. aggressively the rate.
Mexican peso contracts in Chicago had been net short or against appreciation from December 14 to March 7.
However, this stance has turned around in the last three weeks and now speculators in Chicago are expecting the currency to strengthen.
For Janneth Quiroz, this change in the perception of the futures market coincides with the appreciation of the peso against the dollar, particularly in the last week, given fewer concerns about a systemic banking crisis, since the authorities have announced various programs of bailout and are giving certainty that the critical situation of the banks does not lead to an economic crisis.
gets stronger
“The strength of the peso has to do with several factors. One of them refers to the important recovery of the United States economy, with exports, although they slowed down in February, increasing in general terms. Tourism and direct foreign investment are also the main items through which dollars enter the country,” said the deputy director of Analysis at Monex.
Regarding the Mexican economy, the increases in the interest rate (which reaches levels of 11.25%) by Banxico have helped to maintain in this 2023 a differential of 625 base points between the interest rate between the United States and that of Mexico.
“Possibly we will see the exchange rate trade again below 18 pesos per dollar, as long as there is no event that causes nervousness in the market again,” concluded Janneth Quiroz.
