Peso falls on expectations of higher increases in Fed rates

The Mexican peso depreciated against him American dollar this Friday, for the second day in a row. The local currency fell as the greenback strengthened on bets of further rate hikes in the United States.

The exchange rate closed operations at 20.2420 units against an official close of 20.2057 units yesterday, with data from the Bank of Mexico (Banxico). That meant for the local currency a loss of 3.63 cents or 0.18 percent.

The cross traded with volatility in a range between a maximum of 20.3794 units and a minimum of 20.1720 units. The Dollar Index (DXY), which measures the greenback against six benchmark currencies, was up 0.61% at 101.19 points at the close.

The president of the Federal Reserve (Fed), Jerome Powell, announced that the central bank will discuss at its next meeting on May 3 and 4 the possibility of increasing interest rates by 50 basis points to respond to inflation.

During the day, the peso weakened to its worst level in a month, but cut a large part of the losses after the release of local inflation figures that fueled expectations of more hikes by Banxico.

“In the scenario that the exchange rate quotes at current levels until the following week, the door is opened to a greater depreciation of the Mexican peso. The next resistance is located at 20.50 units,” Banco Base said.

In the week, the weight accumulates a decline of more than 1.60 percent. Currently the differential between the high interest rates in Mexico and the rates in the United States favors the Mexican currency in the so-called carry trade.

jose.rivera@eleconomista.mx