The Mexican peso experienced its third consecutive day of decline on Thursday, reflecting a broader aversion to risk among investors. This downward trend coincides with the market’s reaction to robust economic data released in the United States, which has bolstered the dollar.
According to the Bank of Mexico (Banxico), the exchange rate closed at 18.4524 pesos per dollar, down from 18.3705 pesos the previous day. This 0.45 percent decrease translates to a fall of 8.19 cents for the Mexican currency. During the trading day, the dollar fluctuated between a high of 18.5887 pesos and a low of 18.3190 pesos. Meanwhile, the Intercontinental Exchange Dollar Index (DXY), which benchmarks the dollar against a basket of six major currencies, remained steady at 104.39 points.
Local investors remain wary due to the ongoing debate over the controversial judicial reform proposed by Morena, the ruling party in Mexico. Additionally, the upcoming U.S. election continues to inject uncertainty into the global financial markets.
“Yesterday’s inflation report and the legislative environment led some hesitant investors to close their positions in the national currency, which strengthened the dollar,” stated José Feliciano González, a professor at the Escuela Bancaria y Comercial (EBC).
Adding to the peso’s woes, the U.S. gross domestic product (GDP) for the second quarter grew at an annualized rate of 2.8 percent, significantly exceeding the 2 percent forecast by analysts. This unexpected growth has fueled speculation about potential interest rate cuts by the Federal Reserve, thereby strengthening the dollar further.
Despite the positive economic indicators from the U.S., pressure on Mexican assets prevented the peso from benefiting from the anticipated wider interest rate differential. Over the past three sessions, the peso has depreciated by 51.16 cents, or 2.85 percent, falling from 17.9408 pesos on Monday.
“Risk aversion continues,” noted Grupo Financiero Banorte in an analysis note. Analysts at Intercam Casa de Bolsa highlighted that the exchange rate faced short-term resistance at 18.43 pesos and found support at 18.32 pesos.
As investors digest these developments, the outlook for the peso remains uncertain, influenced by both domestic political dynamics and international economic trends.
