The peso closed the session with an appreciation of 0.46% or 9.1 cents, trading around 19.80 pesos per dollar, touching a low of 19.7006 pesos per dollar, a level not seen since March 5.

In the foreign exchange market, the peso was the fourth most appreciated currency in the wide basket of main crosses, after the South African rand that appreciated 1.13%, the Czech koruna that advanced 0.55% and the Indian rupee with 0.52 percent.

The appreciation of the Mexican peso was mainly due to three factors:

First factor

Positive news was released regarding the distribution of the Covid19 vaccine in the United States.

According to a report from the United States Food and Drug Administration (FDA), the vaccine developed by Pfizer Inc. and BioNTech SE is highly effective in preventing Covid19 and there are no safety issues that prevent authorization for distribution for emergency purposes.

The government agency has not yet given authorization for the distribution of the vaccine in the United States, but it is highly likely that this will happen in the short term.

Second factor

The possibility of Republican and Democratic lawmakers reaching consensus to pass a broader package of fiscal stimulus.

Senate Republican leader Mitch McConnell said he is willing to compromise on some points on the package that Democrats disagree with, in exchange for them also yielding on points Republicans do not approve of.

McConnell proposed that both parties focus on mutually agreed-upon issues: supporting small and medium-sized businesses, expanding unemployment insurance and financing the distribution of vaccines.

This allowed the three main capital market indices in the United States to reach new all-time highs during the session.

The Nasdaq closed 0.50% higher, the S&P 500 gained 0.28% and the Dow Jones 0.35%.

Third factor

The appreciation of the South African rand, which gained 1.13% during the session, with the dollar-rand parity touching a low of 14.9686 rand, its lowest level since February 21.

The strength of the rand is due to the publication of economic growth for the third quarter, which stood at an annualized quarterly rate of 66.1%, beating market expectations of 54.4 percent.

At an annual rate, the South African economy continues to show a contraction of 6%, after falling 17.1% in the second quarter.

The peso

It should be added that yesterday afternoon, Banco de México announced that it will offer two auctions for 1.5 billion dollars each on December 9 and 14, both with a maturity period of 84 days.

The operations will be carried out with resources from the swap line established with the Federal Reserve on March 19, in order to support the provision of liquidity.

Indicators of Banxico

It should be noted that initially the swap line had a duration of six months, but the Federal Reserve extended its validity until March 31, 2021.

Tax incentives

From the technical point of view, the exchange rate is likely to try to pierce the support of 19.70 pesos per dollar that was respected during the session.

For now, if the positive news about the probable approval of fiscal stimuli in the United States and about the coronavirus vaccine continues, the door remains open for a drop in the exchange rate to the level of 19.40 pesos per dollar.

In the session, the exchange rate touched a minimum of 19.7006 and a maximum of 19.9108 pesos per dollar, the euro touched a minimum of 1.2096 and a maximum of 1.2134 dollars per euro.

Finally, the euro peso touched a minimum of 23.8465 and a maximum of 24.1101 pesos per euro.

At the close, the interbank prices for sale were 19.7970 pesos per dollar, 1.3352 dollars per pound and 1.2107 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE