The peso posted its best week since May last year, driven by a global weakening of the dollar, but mainly by a rise in the Bank of Mexico’s benchmark rate the day before.
The currency closed at 19.8740 per dollar, a 0.3% depreciation compared to Banxico’s closing price on Thursday. However, during the week, the peso gained 3.7% and the biggest rise was registered on Thursday, after a surprise rise of 25 basis points, to 4.25%, in the Banxico rate.
“The weakness of the dollar due to the caution of investors in the face of a new Fed stance, a growth outlook that continues to improve and a higher carry after the increase in Banxico’s interest rate supported the recovery of the peso,” analysts at Monex on a note.
The peso also became the most appreciated currency in the last five days, among a sample of 25 currencies from emerging countries monitored by Reuters, and it recovered from the sharp fall recorded in the previous week.
“(The central bank’s decision) helped to consolidate the peso’s gains as it broke down the psychological level of the 20s,” Jorge Gordillo, CI Banco’s director of analysis, said earlier.
The expert added that the peso could have “a calmer summer”, however, he warned that its performance will depend on the perception of the next steps of the United States central bank, as well as employment and inflation in that country.
In addition to Banxico’s decision, the Mexican currency also benefited from a 0.82% drop in the dollar in the week, due to “less speculation about the possibility that the Federal Reserve adopts a less flexible monetary stance,” said Gabriela Sille, director of Financial Economic Analysis at Banco Base.
During the week, Jerome Powell, president of the Fed, assured that inflationary pressures are temporary and that monetary policy will remain flexible.
Meanwhile, the benchmark S & P / BMV IPC index, made up of the most liquid stocks on the market, fell a marginal 0.02% to 50,549.86 points, after investors assimilated earlier a weak data on the performance of the Mexican economy during April.
In the week, the accumulated gain was 0.46%.
The local statistical institute INEGI revealed earlier that the Mexican economy contracted 0.2% in April compared to the previous month, which implied a setback in the recovery that, according to Banxico, will continue the rest of the year.
With information from Reuters.
