Dollar breaks support of 19.25 pesos; touch minimum of 19.04

The exchange rate reached a minimum of 19.0402 pesos per dollar this Tuesday (its lowest level since February 25, 2020) in electronic operations this Tuesday and analysts expect that in the coming days it can break the floor of 19.00 units, as that the US banknote is weakened by a wave of optimism at the global level.

After having touched the minimum at 5:30 in the morning (before the opening of the session), the exchange rate rebounded slightly to head towards 19.20 pesos. The day ended at 19.2367 units, according to data from the Bank of Mexico (Banxico).

“Yes, that floor of 19.00 pesos per dollar can be broken, because the dollar is weak due to global optimism. It seems that the market wants to return to how we were before the coronavirus, but there are many risks,” said Gabriela Siller, director of analysis at Banco Base.

He assured that today’s optimism is explained by signs that China could relax its zero Covid policy, which in recent days has generated a wave of protests in some cities. This Tuesday, the government announced that it was going to reinforce vaccination among the elderly.

“The expectation is fueled that in the future the zero Covid policy could be relaxed and in view of this it is expected that China could accelerate its economic growth and increase the demand for commodities, hence we saw that several Latin American currencies (including the peso ) had gains against the dollar,” explained Janneth Quiroz, deputy director of analysis at Monex Casa de Bolsa.

However, the Banco Base analyst stressed that despite the optimism there are still several risks in the environment, “that is why there was a rebound in the exchange rate” after touching the minimum of 19.0402 units.

The dollar index – which measures the strength of the US bill against six currencies – remained practically unchanged on Tuesday, with a rise of just 0.11% to 106.74 units. The euro and sterling rose 0.02 and 0.3%, respectively, while the Japanese yen was down 0.01 percent.

With the appreciation on Tuesday, the parity broke the support of 19.25 units, a level that had not been broken since February 2020, so the new important technical level to beat is that of 19.00 pesos per dollar, according to analysts.

“The 19.00/05 area is important support. A break down would open the doors to more gains for the peso. As long as it holds above, a consolidation between 19.00/05 and 19.25/30 seems likely,” OctaFX analysts said in a note.

Janneth Quiroz assured that the break of the support of 19.25 pesos per dollar was “weak”. “What we are waiting for is that there is more evidence of the behavior in the next sessions to determine if indeed the exchange rate will be operating between 19.00 and 19.25 units,” she said.

Fortaleza

Since October 20, the interbank dollar has traded below 20 pesos. The Mexican currency accumulates an appreciation against the dollar of 4.10% or 82.16 cents since that date.

Erick Martínez, exchange rate strategist at the English bank Barclays, stated that the strength of the peso in recent weeks has to do with its attractiveness given the rate differential between Mexico and the United States, as well as healthy macroeconomic fundamentals in the country.

For her part, Gabriela Siller explained that the exchange rate has been supported in recent months by a high flow of foreign currency to Mexico for exports, foreign direct investment (FDI) and remittances.

“The speculative positions in the Chicago futures market that have turned in favor of the peso have also favored the appreciation of the Mexican currency,” said the Banco Base analyst.

In an analysis, Gabriela Siller highlighted that the foreign exchange market is deep with a global volume of operations of the Mexican peso of 114 billion dollars per day, which “serves to understand that speculative adjustments in the foreign exchange market are very relevant and may cause movements in the exchange rate in the short term.

So far this year, the peso has gained 6.19% against the dollar and is the second most appreciated currency against the US bill, only surpassed by the Russian ruble.

Like the peso, other emerging market currencies also posted gains against the dollar on Tuesday.

The Brazilian real appreciated 1.78%, trading at 5.2700 reais per dollar. For its part, the South African rand gained 0.84% ​​to 17.00 units per US bill.

sebastian.diaz@eleconomista.mx