The Mexican peso is considered one of the so far this year and, compared to the euro, has a better performance and has had greater strength against the dollar.
At least during the first half of the year and until this week, the peso was considered the strongest currency in Latin America. So much so that experts called it the super weight.
The peso is one of the few currencies that did not depreciate against the dollar despite the problems that are being experienced worldwide: inflation, threats of recession, crises in world trade supply chains, among others.
Instead, the euro was gradually approaching parity with the dollar , something that had not happened for at least 20 years and, on Wednesday, it was even worth less than a dollar.
The peso depreciated 1.5% against the dollar, between December 31, 2021 and July 12, 2022.
In contrast, on the same date, the euro had already lost 12% of its value compared to the dollar.
While on December 31, 2021, each euro was sold for 1.13 dollars, between July 12 and 14, 2022 it reached lows of 0.995 dollars per euro.
The peso stands out among Latin American currencies
The fall in the prices of raw materials, due to the fear of a global recession, has caused the various currencies of Latin America to depreciate against the dollar.
However, as of June 1, 2022, the weight had grown so strong that it was called a superweight. It had gained a 4% appreciation against the dollar in the first five months of the year. This despite the fact that the dollar index, which measures the performance of the greenback against a basket of currencies, had rebounded 7% in the same period and has reached levels not seen since 2016.
The strength of the peso, however, is explained by some factors such as the good level of exports (oil and manufacturing), records in receiving remittances sent by migrants to families, and the rise in the Bank’s interest rate. from Mexico.
In June, the Bank of Mexico, following the adjustment trend in the United States, raised the reference rate by 75 basis points. A historic increase. And, as part of measures to combat inflation, the central bank is expected to raise the rate again by the same amount in its next monetary policy decision.
, growing 14.3% compared to the same month of 2021.
The euro, meanwhile, weakened recently in the face of threats of a recession in the European Union. In addition, their interest rates have not risen as much as in the United States and Mexico. And, finally, the extension of the war between Ukraine and Russia threatens to cause an energy crisis in the Old Continent.
The dollar reached the barrier of 21 pesos
Although the peso has experienced several months of stability against the dollar, this strength is increasingly diminishing. Inflation data in the United States established a “volatile tone in the markets.”
And, according to the Monex Financial Group, after the peso closed Wednesday’s session with an exchange rate of 20.73 pesos per dollar, the barrier of 21 pesos is about to be broken.
Even so: “Within the currencies of emerging countries, it is positioned as the sixth with the highest gains against the dollar and presents a difference of 36 cents between the maximum level and the intraday minimum ,” Monex said in a statement.
The US inflation data -with the largest increase in 40 years- and the strength of its labor market give the US monetary authority enough arguments to raise its interest rate by 100 basis points during the next FED meeting , from July 26 and 27.
Given this perspective, Monex indicates, a climate of greater volatility is established for the peso, compared to the dollar. And, in this sense, the Bank of Mexico will have to follow an increase in the reference rate.
