The weakness of the dollar and external factors such as remittances and record exports from Mexico boost the Mexican peso, which surprises as the third most appreciated currency this year while other Latin American currencies have hit historical lowsaccording to analysts consulted by EFE.
While currencies such as the euro, the pound sterling and the pesos of Chile and Colombia have fallen against the dollar, the Mexican currency is the third with the best performance so far this year, with a positive variation of 3.82% until November 1 , last day in which the Mexican market opened.
Mexico’s peso is only behind the Russian ruble (17.61%) and the Brazilian real (8.29%), which positions it in second place in Latin America, according to data shared with EFE by Banco Base.
Even so, “we cannot speak of a strength of the peso, but rather of a weakness of the US dollar,” said Gabriela Siller, director of Financial Economic Analysis at Banco Base.
push ups for weight
The also academic from the Tecnológico de Monterrey pointed out that other factors that have helped the Mexican currency are the inflow of remittances, foreign exchange flows from Mexican exports and foreign direct investment.
Until September of this year, remittances added 29 consecutive months with annual historical increases, while exports grew by 25% in the ninth month of 2022.
“In addition, the monetary policy of the Bank of Mexico (Banxico), which has followed in the footsteps of the United States Federal Reserve (Fed), also favors the currency,” added the specialist.
The Mexican peso closed at 19.72 per US dollar on November 1, while on the first day of the year it was trading at 20.53according to interbank data from the Bank of Mexico.
Siller added that the price of the Mexican currency could reach 19.5 pesos per dollar if global risk aversion and the pace of interest rate hikes are reduced, and disruptions in supply chains are fixed along with the end of the “zero covid-19” policy in China.
Meanwhile, Janneth Quiroz, chief economist of the Monex Financial Group, explained that the peso is a financial asset, so if more dollars enter, this increases supply and the exchange rate remains at the same levels.
The analyst also highlighted that tourism has contributed, especially due to the greater number of foreigners who have moved to Mexico due to new labor trends such as telecommuting, which leaves income in dollars.
A lasting trend?
Despite the resistance of the peso, the agency Moody’s Analytics warned last month of a “imminent” depreciation of the Mexican peso of 20% against the dollar between 2022 and 2023 by “the monetary tightening” of the Fed in the United States.
Quiroz considered that there may be an additional appreciation for the dollar in the following rises in the Fed’s interest rate, since the expectation is that aggressive escalations will decrease.
The expert explained that the feeling of a possible relaxation of monetary policy “would end up supporting a greater demand for these assets,” including the Mexican currency.
Quiroz added that some internal factors that would drive a greater entry of US dollars into Mexico is to maintain “an environment conducive to investment, as well as the main macroeconomic indicators.”
Ignacio Martínez, from the Laboratory of Analysis in Commerce, Economy and Business (Lacen) of the National Autonomous University of Mexico (UNAM), warned that the appreciation of the peso is only due to external factors.
The expert referred that Mexico maintains a certain macroeconomic stability, but stated Adverse internal factors such as negative gross fixed investment, the loss of 120,000 jobs in September alone and inflation of 8.53% in the first half of October.
“Then what we have with the peso is not the result of the situation of the internal market, but of macroeconomic stability, mainly as a result of these indicators that foreign currency enters the country as remittances and exports,” he concluded.
MORE NEWS:
EFE International news agency based in Madrid and present in more than 110 countries.