The peso starts the session with a depreciation of 0.35% or 7 cents, trading around 20.03 pesos per dollar, with the exchange rate touching a minimum of 19.9621 and a maximum of 20.0829 pesos.

With this movement, the peso erases most of Thursday’s appreciation and accumulates an advance of only 0.27% or 5.3 cents in the week.

In line with expectations, the dollar weighted index shows an upward correction of 0.20%, after losing ground during five consecutive sessions, something not seen since November 2020.

This rebound effect causes most currencies to depreciate against the dollar during the last session of the week and only three show an appreciation, the Indian rupee with 0.14%, the Swedish krona with 0.06% and the Turkish lira with 0.02 per hundred.

Going forward, the US dollar is likely to continue its weak trend as the Federal Reserve continues to reiterate the need to continue a broadly flexible monetary stance.

In the coming weeks, the main determinant of the weakness of the dollar will be the progress made in the United States Congress to approve the $ 1.9 trillion fiscal stimulus package, which is speculated could be approved in March.

Another factor contributing to the weakness of the dollar is the news about a greater availability of vaccines against Covid19, which reduces the perception of risk in global financial markets.

Pandemic

US President Joe Biden reported that he secured nearly 200 million more doses from pharmaceutical companies Pfizer and Moderna, who pledged to deliver them before July.

He also noted that the number of doses available for the summer could increase if Johnson & Johnson’s vaccine is approved.

In Japan, a panel of experts signed the approval of the Covid19 vaccine developed by Pfizer, with official government confirmation expected to be announced over the weekend, this would be the first vaccine approved in Japan.

It is important to note that there is also a gradual decrease in the number of daily coronavirus infections globally, since an average of about 410,000 daily infections were recorded in the week from Monday to Thursday, after an average number of infections were recorded in January 630,000 infections daily, that is, a 35% contraction globally.

In countries like the United States, the same comparison shows a decrease in daily infections of 52 percent.

The financial markets are calm, with the main capital market indices in Europe advancing an average of 0.07% and showing a mixed behavior.

The volume of operations in the Asian market is very low due to the fact that the Chinese markets remain closed for the Lunar New Year celebrations.

In the United States, the futures market indicates that moderate losses could be observed in the main indices, particularly in industrial sector issuers, extending the downward correction of the gains observed during February.

The peso

Little relevant economic information will be published today in Mexico and the United States.

For Mexico, only the number of job creation registered in the IMSS during January stands out.

It should be remembered that during 2020 647.6 thousand of these jobs were destroyed and only in December the drop in jobs was 277.8 thousand, mainly due to seasonal factors.

In the United States at 9:00 am, the University of Michigan consumer sentiment indicator for February will be published, although the data does not generally have an observable effect on financial markets.

During the session, the exchange rate is expected to trade between 19.90 and 20.15 pesos per dollar.

The euro starts the session with a depreciation of 0.31%, trading at 1.2093 dollars per euro, while the pound loses 0.14% and is trading at 1.3797 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds increased by 1.8 basis points, to 1.18%, while in Mexico the yield on the 10-year M bonds remained unchanged at a rate of 5.58 percent.

The peso and 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 1.45% 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 20.0848 at 1 month, 20.4184 at 6 months and 20.8161 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE