Thursday, December 7, 2023

Peso continues to gain against the dollar

The peso continued to gain against the dollar as it appreciated lightly on Monday. Since Dec. 16, the peso has been making slow but steady gains against the greenback, which is viewed as stable during times of economic precarity.

The exchange rate stood at 19.37 pesos per dollar at the end of the day on Friday, and was sold for 19.84 pesos to the dollar at bank windows. As of mid-day Monday, the peso continued to climb.

The U.S. Dollar Index (DXY), which measures the strength of the dollar against six other major currencies, demonstrated a decrease of 0.08%. The Bloomberg Dollar Spot Index (BBDXY) showed a slight decrease of 0.15%.

The Mexican government 10-year bond increased by 2.8 basis points, reaching 8.91% on Friday.

The peso has outperformed other major currencies in 2022, and is one of the few to have strengthened against the dollar. JPMorgan Chase & Co. and Bank of America Corp. are promoting the Mexican peso as one of the most attractive currencies in Latin America, largely due to the country’s proximity to the U.S. and high interest rates. The central bank raised interest rates by 50 basis points on Dec. 15, to 10.5%.

“There is value in the Mexican peso at its current levels,” currency strategist for Wells Fargo Brenda Mckenna said. “I also like the local political context in Mexico right now. There isn’t much political risk around the peso.”

The peso has registered a 4% advance in 2022, even following a recent bout of weakness. The only global currencies that performed better than the peso are the Russian ruble, the Argentine peso and the Brazilian real, although they are more volatile than the Mexican peso.

The Mexican currency has also had a strong performance in terms of carry trade, where investors borrow in dollars at a low rate to buy debt in pesos at a higher rate, with a return of more than 10%.

With reports by Bloomberg and El Financiero

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