The peso ended as the third most depreciated currency on Tuesday closing at 21.2650 units per dollar, that is a depreciation of 26.91 cents or 1.28% compared to the Monday closing of Banco de México (Banxico) of 21.1775 pesos, returning to 21 units later. four days below that level.
The pressures on the Mexican currency stem from the two-day meeting of the United States Federal Reserve, where this Wednesday its monetary policy decision will be announced. A change is expected in the buyback of bonds, which would reduce the monetary stimulus for the financial market.
“The Fed is expected to accelerate its pace in cutting the bond purchase program, which would allow it to start with the increase in the interest rate in the first half of 2022, earlier than expected,” said Gabriela Siller, director of Economic Analysis at Banco Base.
“In the United States, the rate hike is expected to arrive in 2022. What is unknown is whether it will be in June or before March,” wrote Roberto Galván, a technical analyst at Intercam Banco, in a report.
On Thursday, Banxico will also announce its monetary policy decision in which an increase of at least 25 basis points is expected in the interest rate, which today stands at 5 percent.
James Salazar, Deputy Director of Economic Analysis at CIBanco, explained that “in view of the expectation of at least two increases in the Fed rate, it generates rearrangements in investors’ portfolios and it becomes more attractive to invest in a bond in dollars or in assets denominated in dollars ”.
Janneth Quiroz, deputy director of Economic Analysis at Monex, said that “the bets indicate an expectation that the Fed will initiate a reduction in its asset purchases, which joins the statements of Jerome Powell that indicates that in the next meetings of the Fed the possibility of accelerating the withdrawal of stimuli will be discussed ”.
A less accommodative monetary policy in the United States, said James Salazar, implies a general strengthening of the dollar.
There is a lot of volatility, but the trend continues to bet on the strength of the dollar, and weakness for the other emerging currencies, mainly the peso.
According to a Banco Base report, within the basket of main crosses against the dollar, 28 of the 31 currencies lost ground. In fact, the most depreciated currencies were those of emerging countries.
The most depreciated currency was the Turkish lira (with a fall of 3.91%, followed by the Colombian peso that lost 2.80 percent. Fourth place was for the Israeli shekel with a loss of 0.81% and the Norwegian krone with 0.73 percent.
The US currency strengthened and the dollar index advanced 0.25% in the session and reached 96.56 points, its highest level in four weeks, closer and closer to 96.94 points, its highest level of the year.
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