Peso appreciates for the second day due to the weakening of the dollar

The Mexican peso appreciated in front of American dollar for the second consecutive day. After a period of strength on fears of inflation and rate hikes, the greenback rebounds from 20-year highs.

The exchange rate closed operations at 20.2786 units against 20.3589 units on Friday, with data from the Bank of Mexico (Banxico). This meant an appreciation of 8.03 cents for the peso, equivalent to 0.40 percent.

The cross traded in an open range with a high of 20.3791 units and a low of 20.2244 units. The Dollar Index (DXY), which measures the greenback against a basket of six benchmark currencies, was down -0.13% at 104.57.

Bounce off 20-year highs

The dollar fell from 20-year highs after market bets of a 75 basis point rate hike in the United States last week and after big increases in other countries.

Banco Base explained in a note that this behavior of the market is attributed to a rebound of the dollar after its strengthening in three weeks. He also highlighted the lower liquidity of the market due to holidays in the United States.

Traders remain concerned about inflation and central bank action to curb it. Banxico will make its monetary policy announcement on Thursday and could help reduce pressure on the peso.

“We expect Banxico to make its monetary policy announcement on Thursday and to raise rates again by 75 basis points; the peso could return to levels below 20 units,” explained Eduardo Ramos of ATFX.

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