Peso recovers ground after its fall due to higher rate bets in the US

He Mexican peso regain ground against American dollar Wednesday morning. The local currency advances after being hit by the strengthening of the greenback that generated the expectation of some interest rates highest in the United States.

He exchange rate spot it is located at the level of 17.9851 units per dollar. Faced with an official close of 18.1375 units yesterday, with the data from Bank of Mexico (Banxico), the currency recovers 15.24 cents, which is equivalent to a variation of 0.84 percent.

The pair operates in a limited range with a maximum of 18.1272 units and a minimum level of 17.9775 units. He Dollar Index (DXY), which measures the greenback against the other G7 currencies, remains stable at 105.62 units, after its best day since November.

The president of the Federal Reserve (Fed), Jerome Powell, offered his testimony yesterday in the United States Congress. The central banker raised bets on the terminal rate again at the close of the bullish cycle, in light of some solid economic data.

Now investors expect that at his monetary policy meeting, on March 22, he will increase rates by 50 basis points to 5.25%, and according to CME FedWatch futures, in May and June he would raise them by 25 basis points per meeting to 5.75 percent.

Progress is given by correction

While rate expectations favor the dollar to remain strong, the peso is rallying on a price correction after rebounding from a 2017 low seen more than five years ago. Analysts believe that it could continue to decline.

“The appreciation of the peso is the result of a partial correction after the losses of the first two sessions of the week and a sign that the market continues to bet on a strengthening of the Mexican peso in the short term,” said local Banco Base.

“We remember that our expectation for the exchange rate is located at the level of 18.90 units per dollar by the end of the year, but we do not rule out that in the short term it could reach levels of 17.50,” Actinver analysts explained in a report.

jose.rivera@eleconomista.mx