The peso closed the session with an appreciation of 0.96% or 19.8 cents, trading around 20.53 pesos per dollar, with the exchange rate touching a minimum of 20.5055 and a maximum of 20.7666 pesos, ranking as the most appreciated currency in the broad basket of main crosses, followed by the South African rand that appreciated 0.91%, the Brazilian real with 0.34% and the pound sterling with 0.32 percent.

The appreciation of the peso was mainly due to two factors:

First factor

A downward correction of the exchange rate was observed after rising for six consecutive sessions, something that had not happened since the beginning of August 2020.

The correction also occurred for other currencies of emerging economies, although it was greater for the Mexican peso, which has lost ground due to an increase in the perception of risk with respect to Mexico.

It should be noted that there are still upward risks for the exchange rate in the short term and movements towards the key level of 21.00 pesos per dollar cannot be ruled out.

Second factor

The appreciation of the peso was accentuated as of 8:30 a.m., when the appearance of Fed president Jerome Powell began before the Senate Banking Committee, where he reiterated that the Federal Reserve is still far from beginning to withdraw the support to the economy through the injection of liquidity to the financial system.

The weighted dollar index that he was gaining during the morning changed trend and closed the session with a decline of 0.09%, accumulating four sessions lower.

Electricity and the peso

It is important to note that there are factors that could raise the perception of risk in the very short term.

Today the reform to the Electricity Industry Law is under discussion in the Chamber of Deputies, which will probably be approved representing a risk to public finances and which could also bring with it tariff increases and an additional decrease in gross fixed investment, inhibiting economic recovery.

On the other hand, in the context of the visit of the President of Argentina to Mexico, a press release was published in the Chamber of Deputies proposing a single tax on wealth in order to face the health emergency and the economic crisis, similar to how it was implemented in Argentina in December.

It should be noted that Argentina does not have an economic model to follow, since its policies have led to recurrent crises and the implementation of this type of tax would only increase the risk of capital outflows from the country in a context of free mobility.

Finance and the peso

Finally, today the Ministry of Finance declared void the auction of M Bonds due in 2047. These bonds reached a minimum rate in the year of 6.57% on January 2 and a maximum in the year of 7.17% yesterday.

Today’s bids in the M 2047 Bond auction averaged close to 7.05 percent.

The declaration of an empty auction is probably due to not wanting to pay such a high fee.

However, declaring it void resulted in speculation about what happened and why the decision was due.

The last time a government securities auction was declared void was on March 19, 2020 in the 10-year Udibonos.

The difference is that, on that occasion, the positions were above the market because it was the initial overreaction to the pandemic and now there was demand with positions at the market level.

In the session, the euro touched a minimum of 1.2135 and a maximum of 1.2180 dollars per euro. Finally, the euro peso touched a minimum of 24.9102 and a maximum of 25.2591 pesos per euro.

At the close, interbank quotes for sale were 20.5290 pesos per dollar, 1.4109 dollars per pound and 1.2143 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE