Of this emerging currency market, Janeth Quiroz, deputy director of economic analysis at the financial firm Monex, pointed out that the peso was the third emerging currency with the highest gains against the dollar at the start of operations on March 25, when it traded below the 20 pesos per green ticket.
The truth is that investors looking to take advantage of the carry trade know that they are taking a risk by betting on a higher yielding market. Therefore, the volatility associated with the exchange rate is relevant. This is where the peso, which is one of the most liquid currencies in the world, has taken advantage over the currencies of countries such as Russia, Turkey or Brazil, where double-digit interest rates are offered, but the volatility is greater than the What is in the Mexican market?
No investor wants to be taken by surprise by central banks and, for example, by the president influencing monetary policy decisions, as happened in Turkey, or to have a high risk of default, as is the case in Russia, which has a number of economic sanctions and is practically isolated by its invasion of Ukraine.
With inflation out of range and a ‘hawkish’ Fed, the rate hike seems to have no cap at 6.5% in Mexico. Most economic analysts agree on a rise of 50 basis points for Banxico’s next monetary policy decision. The market is even discounting an increase of up to 250 base points by the end of the year, projecting the interest rate at a record level of 9% per year.
“Barring unexpected risk events, (the spread between emerging and developed markets) should increase the attractiveness of emerging market currencies,” the Barclays research team noted.