Investors on the Chicago Futures Exchange (CME) are confident in the resilience of the Mexican peso, as positions reached their highest level in three years in the week of May 9.
With 70,032 net long contracts, of 500,000 pesos each, speculative bets have remained net long, adding up to nine consecutive weeks.
In addition, they were at their highest level since the week ending March 10 of last year, when 112,500 contracts were recorded.
The number of contracts reported in the week of May 3 to 9 represented an increase of 21.35% when compared to the 57,710 units registered in the week of April 26 to May 2.
“Bets on net speculative positions continued in favor of the peso on the Chicago Futures Exchange and have been net long since March 8 through May 9, reaching the highest level since March 10, 2020” said Janneth Quiroz, Deputy Director of Analysis at Monex Casa de Bolsa.
The foreign exchange market expert highlighted that the positive sentiment of speculators in the CME was observed after the United States Federal Reserve (Fed) presented a less hawkish tone than the previous ones in its statement on May 3, which reinforces “the bets that the bullish cycle has already ended, with a terminal rate at 5.25 percent.”
“Heavyweight”
Although the exchange rate fell slightly against the dollar in Friday’s session, it ended the week from May 8 to 12 with an appreciation of 1.12%, to 17.5797 pesos per greenback, equivalent to a gain of 19.99 cents, according to the official figures of the Bank of Mexico.
It also managed to stay below 18 units per green ticket for one more week, thus registering 11 consecutive days at that level.
In fact, so far in 2023 the peso has accumulated an appreciation of 9.89% against the dollar.
Last week, the performance of the Mexican currency was strengthened by the publication of inflation data for April in Mexico and the United States, as well as by fears of a recession in the neighboring country to the north.
“The peso continues to show a resilient performance against the dollar. Last Wednesday, the exchange rate reacted strongly to the inflation figures from the United States, marking its best level at 17.54 units per dollar, which approached the intraday minimum of 17.47 pesos per greenback in July 2017,” he said. Alejandro Padilla, Deputy General Director of Economic and Financial Analysis at Banorte.
Pay attention to Banxico
The executive said that the market will be attentive on Thursday to the monetary policy decision of the Bank of Mexico.
“With our rate expectation, the spread with the Fed will remain at 600 basis points, which is an attractive level against its emerging peers,” he commented.
“In addition, a correction in the cuts that the market discounts in the second half of 2023 would be additional support for our currency,” Alejandro Padilla pointed out.
The peso could even break through the floor of 17.50 units per dollar, as long as volatility remains contained.
