Tuesday, November 28, 2023

Analysts predict peso will end the year just below 18 to US dollar

Mexico’s peso was checking in by mid-afternoon Tuesday at 17.12 pesos to the U.S. dollar — a minor decrease compared to Monday, when it closed at 17.08. But based on the estimates of some recent surveys, the currency is likely to have its value shaved significantly during the progression of 2023, before finishing the year at 17.90 or 17.95 pesos, say experts

One banking specialist even estimated that the peso would weaken to 19.50 pesos to the U.S. dollar.

The central branch of the Bank of Mexico in Mexico City.
The Bank of Mexico survey revised previous estimates for the December exchange rate with the U.S. dollar. (Alfonso21/Wikimedia)

Banxico’s July 2023 survey, which gathered input from foreign exchange market specialists, estimated that the peso will reach 17.90 per U.S. dollar by the end of December. That’s an improvement over its estimate in June, which was 18.33.

A Citibanamex survey is guesstimating the peso’s value to the U.S. dollar on Dec. 31 will have weakened to 17.95 pesos, but it’s an improvement over its earlier estimate of 18.30 pesos.

Banco Bx+’s latest survey was one of the most pessimistic. A far cry from the average range of 16.6 to 16.7 that the peso achieved for 15 consecutive days in July, the online banking specialist’s newest estimate is that the peso will close 2023 at 19.50 pesos to the U.S. dollar.

Despite some differing opinions on the peso’s future, experts did agree that the Mexican currency’s actual performance will depend on factors such as monetary policy decisions and the strength of economic data in Mexico and the United States.

Alejandro Saldaña, chief economist at Banco Bx+
Alejandro Saldaña, chief economist at Banco Bx+, predicted that the peso will depreciate significantly by the end of the year due to factors associated with lower world economic growth. (Alejandro Saldaña/Twitter)

According to the newspaper El Economista, the Ministry of Finance has the exchange rate going into 2024 pegged at 19.1 in an early draft of its 2024 budget. That figure, however, can be updated next month before the budget is due.

He said that added pressure in 2024 will come from the June presidential election in Mexico and the November presidential election in the U.S.

Janneth Quiroz, director of analysis at Monex financial firm, estimated that the peso will finish 2023 at 18.15 per U.S. dollar, though a figure below 18 is not unlikely, she added.

“Right now, the market is adjusting,” said Jessica Roldán, chief economist at the Finamex financial firm, which predicts the peso to end at 17.90. “Surely, in a few weeks we will be seeing a less volatile environment. After all this volatility disappears, there may be better exchange rates in the short term.” 

“Perhaps we will not return to such low levels that we saw [in July], but the Mexican currency can return to around 17 units per dollar,” she added.

The peso ended last week down 2.5% against the U.S. dollar, closing at 17.088 after a Friday rally.  It closed Monday at 17.08.

With reports from El Economista and Bloomberg

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