The peso closed the week with a depreciation of 2.38% or 48.7 cents, trading around 20.92 pesos per dollar, with the exchange rate touching a minimum of 20.3504 and a maximum of 21.0477 pesos, a level not seen since November 4, 2020.

The weekly depreciation of the peso was the highest since the last week of January, in which the peso depreciated 3.00% or 59.9 cents.

It should be noted that, during the week, the Mexican peso was the fifth most depreciated currency in the broad basket of main crosses, after the Turkish lira with 6.70%, the Brazilian real with 3.99% and the South African rand with 2.97% and the peso Chilean with 2.40 percent.

In February, the peso depreciated 1.67% or 34.3 cents, with the exchange rate touching a low of 19.8924 and a high of 21.0477 pesos.

In the month, the Mexican peso ranked as the sixth most depreciated currency, behind the Argentine peso with 2.80%, the Brazilian real with 2.35%, the Swiss franc with 2.07%, the Hungarian forint with 1.93% and the Japanese yen with 1.75 percent.

The peso

During the week (and in the second half of the month), the factors that led to the depreciation of the peso were:

First factor

The strengthening of the US dollar in the face of wide increases in interest rates in the bond market.

The weighted index closed the week with an advance of 0.95%, the highest since the last week of October 2020.

In the bond market, the yield rate on 10-year Treasuries rose 10.8 basis points in the week and 38 basis points in the month, reaching 1.44%, touching a maximum of 1.6085% not seen since February 2020.

The upward movement in interest rates is due to investors reducing their exposure to losses in anticipation of a less flexible monetary stance by the Federal Reserve.

Second factor

A greater perception of risk over Mexico after low temperatures were recorded in Texas and northern Mexico in the middle of the month, affecting the production and supply of energy and raising its price.

This led to stoppages in production lines in the manufacturing sector, mainly in the automotive sector.

A second event that increases the perception of internal risk was the approval in the Chamber of Deputies of the reform of the Electricity Industry Law, which increases the probability of a further deterioration of investment in the country.

Government securities

Exchange rate volatility stood at 14.77% in February, the highest volatility for the same month since 2016.

It should be added that, in the face of increases in exchange rate levels, volatility also tends to increase, so it is likely that volatility will remain high as long as the exchange rate trend is upward.

Exchange rate

It is important to add that the lower demand for debt instruments at a global level, combined with a greater perception of risk in Mexico, increases the probability of capital outflows from the country.

In the month, the yield rate of the 10-year M bonds showed an increase of 63.5 basis points, standing at 6.24%, the highest monthly increase being October 2018, reaching a maximum of 6.29%, a level not seen since March 3. November 2020.

As of February 17, the holding of government securities by foreign residents shows an increase in the month of 2,736.74 million pesos, reaching 1 trillion 883,311.61 million pesos, although in the year a capital outflow of 7,736.71 million pesos continues to be observed. .

In the week between Wednesday 17 and Tuesday 23 February, the net speculative positions awaiting an appreciation of the peso in the Chicago futures market, showed an increase of 1,613 contracts, each of 500 thousand pesos, placing in 3,025 contracts.

In the month, the euro touched a low of 1.1952 and a high of 1.2243 dollars per euro. Finally, the euro peso touched a minimum of 24.1424 and a maximum of 25.6439 pesos per euro.

At the close, the interbank quotes for sale stood at 20.9180 pesos per dollar, 1.3930 dollars per pound and 1.2064 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE