The peso closed the session with a depreciation of 1.66% or 35.3 cents, trading around 21.70 pesos per dollar, placing it as the most depreciated currency in the wide basket of main crosses.

The foregoing confirms a break to the upside due to a return in the perception of risk to financial markets due to the coronavirus, which threatens to stall the global economic recovery.

In the last three sessions, the peso has depreciated 3.97% or 82.9 cents, being in the same period the second most depreciated currency in the basket of main crosses, after the Brazilian real, which accumulated a 4.26% decline and followed by South African rand accumulating a loss of 3.80 percent.

The peso and the Fed

The depreciation of the peso during the session was mainly due to two factors:

First factor

In global financial markets, an increase in the perception of risk associated with the Covid pandemic19 was observed. The Global Risk Perception Base Indicator (PPI) stood at 343 units, which implies perception for high risk. Within the index, the components of the currency market, money and country risk, showed results consistent with this nervousness. In relation to the implementation of new confinement measures, the Prime Minister of the United Kingdom, Boris Johnson, announced that he would tighten some social distancing measures for the next 6 months.

Second factor

There was brief speculation about the possibility that the Fed could start raising its interest rate earlier than expected. Although the economic recovery is far from complete, today the regional chairman of the Chicago Federal Reserve, Charles Evans, said in a virtual conference that the Fed could raise the rate before reaching the average inflation target of 2%. This caused corrective movements in global financial markets and triggered the depreciation of the peso during the morning.

Exchange rate

In the session, the second most depreciated currency after the Mexican peso was the Brazilian real with 1.05%, followed by the Brazilian real that lost 1.05%, the Colombian peso with 1.01% and the Hungarian forint with 0.83 percent.

Indicators of Banxico

In the session, the exchange rate touched a minimum of 21.2939 and a maximum of 21.7615 pesos, the euro touched a minimum of 1.1692 and a maximum of 1.1774 dollars per euro. Finally, the euro peso touched a minimum of 25.0392 and a maximum of 25.4722 pesos per euro.

At the close, the interbank quotes for sale stood at 21.6998 pesos per dollar, 1.2740 dollars per pound and 1.1710 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE