The positive outlook for the Mexican peso yields this year, as the speculative net positions of the currency on the Chicago Mercantile Exchange (CME) stood at 4,900 contracts in favor of the appreciation of the local currency, its best level since December 2020 .
Net positions against the peso began to decline from December 10 when they were at 64,100 contracts, their weakest level since January 2017, and then closed at 4,800 positions in 2021.
The exchange rate stood at 20.4480 pesos per dollar until Friday, January 21, which is an appreciation of 0.29% so far in 2022, although after a seven-week valuation last week it had a 0.65 percent depreciation has.
Even since November 26, when the Omicron variant of the coronavirus was declared a concern, the peso has shown a valuation of 6.35% until Friday, January 21 this year.
The constant increases in the Banco de México interest rate during 2021 have an effect on the stability of the Mexican currency, in addition to the preference of investors for risky assets such as emerging currencies.
However, the possibility of volatility in futures positions among investors is not ruled out, with some weeks rising and others falling, given the expectation of the effects of US Federal Reserve rate hikes. .
Janneth Quiroz, deputy director of analysis at Monex, said speculators’ contracts on the CME were at their best level for the peso since December 2020, with a sharp rise. “Now it’s a net long position, it’s a recovery that has taken place since mid-November.”
The specialist explained that “what we are seeing is that speculators estimate that the peso will perform better in the coming months, which has to do with the existing certainty about the steps that the Federal Reserve will take, as it was one of the main factors that put pressure on the local currency ”.
In fact, the Fed has said it will end the bond buying program at its March meeting and, according to experts, the interest rate will begin its upward cycle in March or through May.
“We also started to see short net positions in December due to the appearance of the Omicron variant which caused a lot of volatility, despite the fact that the large number of infections were not serious.” Quiroz said.
“With the above, we are seeing an improvement in investor sentiment, and there is a possibility that the market has a greater appetite for risky assets, now that these factors have hurt the peso, we now have more information about its impact on the economy,” he said.
James Salazar, deputy director of economic analysis at CIBanco, mentioned that the net speculative positions of the peso reflect the trend that the Mexican currency is showing, i.e. of constant appreciation.
“Strictly speaking, what we observed is that there was an appetite for higher risk assets, especially interest rates on the peso, which ultimately reflects positions in favor of the local currency,” he said.
“On the other hand, investors’ interpretation that the Fed is going to increase its rate is a sign that the economy is on the right track, that the macroeconomic indicators are solid and recovered,” Salazar explains.
The analyst said that despite the Fed’s interest rate hike, the margin remains negative due to high inflation, which allows a profit margin for emerging economies like Mexico, contributing to an expectation of a rise in the oil price that benefits countries that depend on it. raw material. And lastly, the Banco de México rate hike cycle, which is expected to continue on the same path this year.
James Salazar explained that “it is possible that it will remain in positive territory for a few weeks, but the expectation is still of a depreciation of the peso throughout 2022, so at some point we will see the net speculative positions of the peso in negative territory ”.