The peso closed the week with an appreciation of 1.65% or 33.4 cents, trading around 19.91 pesos per dollar, touching a minimum of 19.8597 and a maximum of 20.3270 pesos.

During the first three days of the week, the exchange rate traded most of the time in a channel between 20.15 and 20.30 pesos per dollar, while the market was waiting for relevant economic information towards the end of the week.

The peso

The weekly appreciation of the peso was concentrated in the sessions on Thursday and Friday due to three factors:

First factor

The dollar weakened on speculation that the Federal Reserve will continue to support the economic recovery and the labor market in the United States.

The dollar weighted index fell 1.20% on the week, being the largest weekly decline since November 2020.

In Thursday’s session, the dollar began to weaken after several Fed officials indicated that the most recent inflationary pressures are temporary and that they do not see the risk of inflation above 2% on a persistent basis.

Then, on Friday morning, the non-farm payroll for April showed the creation of 266 thousand job positions, well below the million jobs expected by the market, evidence that there are still downside risks to the recovery of the labor market and the Federal Reserve’s full employment goal.

It should be noted that the minimum in the week of the exchange rate of 19.8597 pesos occurred in the hours after the publication of the non-agricultural payroll in the United States.

Second factor

It is speculated that Banco de México could adopt a less flexible stance in its language, due to the most recent inflationary pressures.

On Friday morning, inflation for April was published, which stood at a monthly rate of 0.33% and an annual rate of 6.08%, exceeding market expectations.

Monthly inflation was the highest for an equal month since April 2009, and it was also the highest annual inflation for any month since December 2017, when it stood at 6.77 percent.

Third factor

An additional factor that contributed to the appreciation of the peso was a carry-over effect of other currencies of emerging economies, the most appreciated currency being the Brazilian real, which advanced 3.89% to settle at 5.23 reais per dollar, touching a minimum of 5,2045 reais not seen since January 14.

The appreciation of the real is due to the fact that on Wednesday the Central Bank of Brazil decided to raise the interest rate by 75 basis points to 3.50%, the second increase of the same magnitude so far this year.

After the Brazilian real, the most appreciated currencies in the week were the South African rand with 3.12%, the Chilean peso with 2.22%, the Czech crown with 2.18% and the Russian ruble with 1.97 percent.

The Mexican peso was in position nine among the most appreciated currencies of the week.

Monetary politics

The following week the markets will remain attentive to the publication of relevant economic indicators.

In the United States, on Wednesday April 12, inflation stands out, which is estimated to be 3.7% per year, which could allow an upward correction of the US dollar against its main crosses.

For its part, in Mexico the announcement of Banco de México’s monetary policy scheduled for Thursday the 13th at 1:00 p.m. stands out, where Grupo Financiero Base anticipates that the Governing Board will keep the target interest rate unchanged at 4.00 percent.

It should be added that, in Friday’s session, Banco de México published a call for an exchange of government securities, which will take place next Wednesday, May 12.

In the auction, the bidders will receive Bondes D in terms of 343, 546, 721 and 938 days. The statement establishes that the maximum amount to be assigned will be based on the bids received.

For the week, the euro hit a low of 1.1986 and a high of $ 1.2171 per euro, its highest level since February 26. Finally, the euro peso touched a minimum of 24.1250 and a maximum of 24.4869 pesos per euro.

At the closing, the interbank quotes for sale stood at 19,9030 pesos per dollar, 1,4004 dollars per pound and 1,2165 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE