Soulless weight in Chicago; they bet on their depreciation

Speculative net positions in the Mexican peso surprised to the downside on the Chicago Mercantile Exchange (CME). After having added eight consecutive weeks betting in favor of its appreciation, they returned to levels seen at the end of 2021.

With a total of 55,100 net short contracts, at 500,000 pesos each, in the week of December 14 to 20, speculators changed their sentiment and now believe that the Mexican currency is going to depreciate, in the short term, against the US dollar. .

The previous data, which corresponds to the week of December 7 to 13, showed that the demand fell by 7.5% or 3,588 units, compared to the previous weekly record, totaling 44,364 net long contracts. Said number was lower than that registered between November 30 and December 6, when the fall was 27.4% compared to the previous weekly closing.

The dynamics in the demand for the peso contracts in Chicago in the week that ended on December 20 was contrary to the performance that the Mexican currency registered last week, since it ended with an accumulated advance of 2.32%, its first weekly appreciation. since November.

Despite the weekly appreciation of the peso, participants in the Chicago futures market have reduced their bets in its favor, amid expectations of lower interest rate increases by the US Federal Reserve, said the director of Economic Analysis of Banco Base, Gabriela Siller.

Although a bearish trend in the exchange of said contracts had already been anticipated, since in the last two weeks the net long positions or in favor of the currency began to reduce.

Previously, the deputy director of Analysis at Monex Casa de Bolsa, Janneth Quiroz, explained that investors in Chicago are anticipating that the 600 base point differential that has been maintained between the interest rates of Mexico and the United States will gradually reduce in 2023. Therefore, he considered that it is possible that for the next few weeks the downward trend in the net positions of speculators will continue.

“Given the expectation of investors that the spread that has been maintained for several months between the United States and Mexico rates could begin to decrease, we may see this downward trend in the net positions of speculators continue in Chicago,” he anticipated. the specialist in Monex.

The interest rate in the United States closed this year in a range of 4.25 and 4.50%, while the Bank of Mexico took it to levels of 10.50 percent.

When speculators -investors or exporters and importers who operate with the currency- maintain net short positions, they consider that the peso is going to depreciate against the dollar.

earned 21 cents

Local currency has its biggest weekly advance since August

The Mexican peso had its highest weekly appreciation against the US dollar, not seen since August, after ending with an advance of 2.32% or almost 46 cents, to settle at 19.3692 units per greenback, data from the Bank of Mexico (Banxico) show. ).

The recovery of the local currency is explained, according to analysts, to the weakness that the dollar has registered in recent days, due to the fact that the market expects that the increases in the interest rate of the Federal Reserve (Fed) begin to moderate.

“The participants of the exchange market moderated their speculation regarding the increase in interest rates expected from the Federal Reserve in 2023 (which was reflected) in the weakening of the US dollar,” said the director of Economic Analysis of Banco Base, Gabriela Siller. .

In the week that ended on December 23, the Dollar Index (DXY) recorded a decline of 0.37%, to settle at 104.31 points. Only in the session this Friday it ended with a drop of 0.11%, according to Investing data.

Gabriela Siller recalled that this is the first appreciation for a week for the Mexican currency since November, after losing ground for three consecutive weeks, accumulating a depreciation of 2.31% or 44.7 cents.

It has also been its largest weekly appreciation since the one reported between August 8 and 12, when it closed with an advance of 2.81 percent.

This Friday ended with a gain of 1.08% or 21.18 cents, operating in a maximum range of 19.5840 units and a minimum of 19.3535 integers.

“The Mexican currency was favored by the good inflation report in November in the United States, which made it possible to offset the negative sentiment due to the economic stagnation in October and the slowdown in exports,” explained the director of Analysis at Monex, Janneth Quiroz. .

He pointed out that inflation in the US was 5.5% in November, which is the lowest since October 2021, with which it was below 6% in September. “These results support the expectation that the Fed will continue to slow increases in its target interest rate,” he said.

For 2023, the director of Economic Analysis of Banorte, Alejandro Padilla, the projection for the price of the peso is to remain in a range between 19.75 and 21.55 units per greenback and a close at 21.20.

“The main factor that will influence the peso-dollar exchange rate will be the evolution of economic activity, which could be uneven. Our base case is that the slowdown we expect in the United States will be more visible and negative for the peso. This would be reflected in a higher trade deficit and remittance inflows, deteriorating the current account”, he opined.

judith.santiago@eleconomista.mx