Mexican peso depreciates due to less optimism about Fed rates

The Mexican peso depreciated against the American dollar this Thursday, given a lack of risk appetite in the markets. The local currency lost ground as optimism waned after fresh comments from the Federal Reserve of USA.

The exchange rate ended this day at the level of 19.4156 units against the record of 19.3106 units yesterday, with official data from the Bank of Mexico (Banxico). The peso lost 10.5 cents with the movement, equivalent to a variation of 0.54 percent.

The crossing operated in an open range between a maximum of 19.4759 units and a minimum level of 19.3102 units. The Dollar Index (DXY), which measures the greenback with a basket of six strong reference currencies, rose 0.40% at the close to the level of 106.71 units.

St. Louis Fed President James Bullard said rate hikes so far “have had only limited effects on inflation” and that the central bank should continue to raise rates by at least another percentage point, agreeing with other policymakers.

Although it has lost ground, the Mexican currency remains strong, with attention being paid to statements by Fed officials about their next steps, which could give more strength to the dollar,” FX hedge fintech Mundi explained in a report.

“The exchange rate is still at levels that are attractive for the advance purchase of dollars and exchange hedges, so additional upward pressures for the exchange rate cannot be ruled out,” explained local Banco Base in a note from analysis.

jose.rivera@eleconomista.mx