The peso begins the week with an appreciation against the US currency due to the discount made by the market on the increase of 75 basis points in the Federal Reserve’s monetary policy announcement on July 27.
According to data from Bloomberg and Bank of Mexico (Banxico), the Mexican currency began this Monday with an appreciation against the dollar of 0.69%, standing at 20.43 units, thus pointing to its second positive day.
The local currency ranks as the fourth most appreciated against the dollar, only behind the Norwegian krone with 0.99%; the Polish zloty with 0.94% and the Swedish krona with 0.72%.
“The exchange rate will continue to be highly influenced in the short term by the relative investment opportunity in emerging currencies in the face of very negative real interest rates in developed countries (dollar and euros). This before the persistent levels of inflation”, said CI Banco analysts.
Third day of depreciation for the dollar
The dollar index (DXY) posted its third negative day as traders bet the Federal Reserve will need to cut interest rates in 2023 to boost growth. The DXY stands at 106,165 points, which means a drop of 0.43% compared to Friday’s close.
“The foregoing is due to the fact that the market has discounted that the next increase in the Federal Reserve interest rate scheduled for this Wednesday, July 27, will be 75 base points, taking the rate to a range between 2.25 and 2.50%, level maximum reached in the last monetary policy normalization cycle at the end of 2018,” said Gabriela Siller, director of economic analysis at Banco Base.
Euro at two-week highs
During the first day of the week, the euro rose 0.1% to 1.02195 dollars per euro, its highest price in two weeks after reaching its lowest level in more than two decades due to pressure on the monetary policy of the European Central Bank .
Neil Jones, head of foreign exchange at Mizuho, said the boost to the euro may have come from traders hedging their short euro positions following the European Central Bank’s decision last week to raise rates for the first time since 2011.
On the other hand, currency analysts at ING said moves in the euro suggest that expectations around the European Central Bank’s policy plans will be more data-driven going forward, with euro zone inflation showing that They will be published on Thursday and Friday.
With information from Reuters