Mexican peso is performing better and remains stable
By Elenne Castro
June 6, 2022
The Mexican peso is having a remarkable period of stability, being one of the strongest currencies in emerging markets and one of the most resistant to rapid recovery.
According to the Mexican Institute for Competitiveness (IMCO), the Mexican peso hit its best level in two years last Monday, May 30, with an exchange rate of 19.49 pesos per dollar at the close of the day; and yesterday it was around 19.69 pesos, a slight drop compared to the previous day, but remaining below 20 pesos per dollar.
It should be noted that the currency has remained relatively stable, after the adjustment that was generated by the uncertainty caused by Covid-19, when the dollar came to be quoted at 24 pesos. In addition, it is one of the most traded currencies in international markets.
According to Bank of America , in an analysis of the performance of the Mexican currency ' The strong peso is here to stay' , it was highlighted that stability is likely to continue, which will generate a positive scenario with respect to the Mexican peso.
Likewise, the Mexican peso has strengthened 17.5% against the dollar since April 2020 , making it the best performing emerging market currency since the pandemic.
REASONS FOR THE RISE IN THE MEXICAN PESO
One of the reasons for this rise has to do with interest rates in Mexico and the United States; since Latin America was the first region that began to increase the cost of borrowing money.
As the Federal Reserve kept rates close to zero, investors put some of their money in emerging markets that offer more stability. But when inflation increased, rates also rose in different countries of the world to try to control it.
Latin American economies have increased the cost of money, with the aim of controlling the wave of inflation, and they have done so faster than in the United States. That is why experts say that the rate differential with the neighboring country has contributed to the appreciation of the Mexican peso, which makes the dollar weaken a little.
This Wednesday, President Andrés Manuel López Obrador commented that the peso has appreciated by 3.5%, so international markets such as Wall Street are surprised by the performance of the Mexican currency.
The president considered that the energy and inflation control policies allowed the country's economy to advance moderately.
“The increase in fuel prices is not hitting us like in the United States, gasoline is still more expensive than in Mexico and that is why they have more inflation than us, they are different policies, instead of considering that we lose with This subsidy, we consider that we won because the popular economy is strengthened, which is what matters to us”, he affirmed.
The peso appreciated on Wednesday in an expectant market and traded at 19.60 per dollar, with a gain of 0.24% against the Reuters reference price on Tuesday. But the dollar index wakes up with an appreciation of 0.22%, regaining part of the ground lost in recent days. According to Monex , most emerging currencies are trading in negative territory, but the Mexican peso remains strong.