Bets in favor of the peso soar in Chicago

In the Chicago Futures Exchange (CME for its acronym in English) bets in favor of the appreciation of the Mexican peso shot up, maintaining long net positions for two consecutive weeks.

From October 26 to November 1, the bids totaled 44,000 contracts in favor of the Mexican currency. This amount was almost 3.5 times more or 31,400 contracts above the 12,600 registrations at the close of October 19-25.

Also, it is the second best level since the February 23-March 1 period, when 42,400 contracts went net long.

Net long positions are said to be booked when the peso is going to appreciate against the dollar.

Specialists explain that the sentiment of investors in Chicago changed due to the expectation that the United States Federal Reserve (Fed) would reduce the magnitude of increases in its target interest rate (the increases are no longer expected to be 75 base points, but 50 basis points).

In fact, the turn that has favored the Mexican peso in the CME occurred prior to the Fed’s monetary policy decision on November 2, when it raised the reference rate by 75 basis points, leaving it in a range between 3.75 and 4.0. %, something expected by the market.

“Net speculative positions awaiting an appreciation of the peso increased to their highest level since March… This is consistent with the performance of the exchange rate in recent sessions,” said Gabriela Siller, director of Economic Analysis at Banco Base.

For the Director of Analysis at Intercam Banco, Alejandra Marcos, the peso has been strengthened by the interest rate differential between Mexico and the United States and by expectations that the “spread” between both rates will continue.

In addition, “the flows that Mexico receives of foreign currencies have not moderated over time, with remittances reaching historical maximums, a strong flow of foreign direct investment as a result of ‘nearshoring’ and the recovery in tourism.”

Weight at its best

The Mexican peso appreciated against the US dollar this Friday, spinning 10 consecutive sessions below 20 units per greenback, at 19.5191 units per dollar, its best level since May 30, 2022.

The Mexican currency was quoted on November 4 at a maximum of 19.6747 units and a minimum of 19.4596 pesos per dollar, data from the Bank of Mexico (Banxico) show.

The price of the Mexican currency is close to closing at 19.5050 pesos per dollar seen on March 2, 2020, shortly before the start of the Covid-19 pandemic.

Gabriela Siller pointed out that the appreciation of the peso is explained by different reasons. One has to do with a better expectation of Mexico’s economic growth, since in the third quarter it increased 4.3% compared to the same period in 2021.

judith.santiago@eleconomista.mx