By Noah Torres
MEXICO CITY (Reuters) – The Mexican peso might stay the most effective performer among the many world’s main currencies within the coming weeks, regardless of Mexico’s central financial institution’s option to halt an almost two-year fee hike cycle, officers mentioned. analysts.
The foreign money traded at 17.40 to the greenback this week, its strongest in seven years, and consultants consider the alternate fee might quickly fall beneath 17 pesos to the greenback, a degree not seen since 2015 .
“It is rather probably that this strengthening of the foreign money will proceed within the quick time period,” mentioned James Salazar, deputy director of financial evaluation at native agency CI Banco, including that the speed differential continues to be very engaging and favors the peso.
The Mexican peso has gained nearly 10% up to now this yr, primarily as a result of weaker greenback and the move of cash into the nation for the reason that central financial institution started elevating rates of interest in June 2021.
Banxico, as Mexico’s central financial institution is thought, suspended fee hikes on Thursday however warned that its key fee might stay at its present file excessive of 11.25% – greater than double that of the US Federal Reserve – for an prolonged interval. .
Among the many elements boosting the peso, analysts cite a gradual inflow of remittances, robust export progress and elevated non-public funding by means of offshoring, the development to maneuver factories to a neighboring nation the place manufacturing is inexpensive.
On the Chicago Mercantile Trade, thought of a market indicator, speculators in various kinds of belongings are more and more betting that the Mexican foreign money will proceed to understand.
These positions, anticipating an additional strengthening of the peso since mid-March, reached 70,007 contracts in favor of the foreign money final week, a degree not seen since March 2020.
Nonetheless, US financial uncertainties such because the dangers of recession, the well being of the banking system and the hazard that the federal authorities is not going to meet its debt obligations, threaten to cloud the outlook for the peso within the medium time period.
Given these elements, Mexican economists anticipate the peso to weaken to 19.13 by the tip of the yr, in accordance with a central financial institution survey, whereas a ballot of consultants of Citibanamex put the determine at 19.20.
