The peso starts the session with a depreciation of 1.06% or 21.2 cents, trading around 20.20 pesos per dollar, with the exchange rate touching a minimum of 19.9858 and a maximum of 20.2216 pesos.
The depreciation of the peso occurs in tandem with falls for most currencies in the foreign exchange market after the US dollar regained strength, advancing 0.45% according to the weighted index.
Likewise, the strengthening of the dollar is due to the following factors:
First factor
The market is anticipating the monetary policy announcement of the Federal Reserve today at 1:00 p.m., where it is speculated that the president of the Fed, Jerome Powell, could give relevant information about the future of the bond purchase program , given that the economic recovery of the United States has been stable. The Fed is expected to keep the interest rate unchanged between 0 and 0.25 percent.
Second factor
In Europe, a member of the Governing Council of the European Central Bank pointed out that they have the necessary tools, including possible cuts in interest rates, to prevent a further strengthening of the euro that generates deflationary pressures.
This morning the euro shows a depreciation of 0.39%, trading around 1.2113 dollars per euro, ranking 13th among the most depreciated currencies. The currencies with the highest depreciation are the South African rand with 0.91%, the Norwegian krone with 0.91% and the Mexican peso.
Third factor
Greater risk aversion is observed in global financial markets. In the commodity market, energy prices show moderate losses, with the WTI falling 0.30% to $ 52.45 per barrel, while industrial metal prices show more severe falls, such as aluminum that fell 0.84% and copper with 1.11 percent.
In the capital market, strong losses are observed in the European markets, where the main indices fall on average 1.8% and in the United States the futures market indicates that drops in the opening could be observed close to 1 percent.
On the other hand, the price of corn hit a new high of $ 5.43 per bushel, not seen since June 27, 2013, due to greater demand from China, which bought 1.36 million tons of US grain, with delivery of the August 31st.
The peso and the pandemic
The nervousness of the markets this morning may be associated with the advance of the pandemic. Authorities in Japan are discussing the possibility of extending the state of emergency, which expired on February 7, until the end of the month.
In the United Kingdom, 100,000 deaths from Covid-19 have already been exceeded, being the fifth country to reach the figure. The United States continues to be the country with the most deaths from coronavirus, followed by Brazil, India, Mexico and the United Kingdom.
During the session, the exchange rate is expected to trade between 20.03 and 20.30 pesos per dollar. The euro starts the session with a depreciation of 0.45%, trading at 1.2105 dollars per euro, while the pound loses 0.37% and is trading at 1.3685 dollars per pound.
Money market and debt
In the United States, the yield on 10-year Treasury bonds decreased by 2.4 basis points, to 1.01%, while in Mexico the yield on 10-year M bonds increased by 1.1 basis points, at a rate of 5.61 percent .
Derivatives market
To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.71% and represents the right but not the obligation to buy dollars in the aforementioned level.
On the other hand, the interbank forward for sale is at 20.2263 at 1 month, 20.5754 at 6 months and 20.9861 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
