Mexico City. The exchange rate closed April at a level of 17.14 pesos per dollar, which implied a depreciation of 3.51 percent against the US currency, equivalent to 58.5 cents, according to data from the Bank of Mexico (BdeM).
Data from the central institute indicate that it was the largest monthly depreciation of the peso since October 2023.
According to analysts at Banco Base, the depreciation of the peso during April was mainly due to the strengthening of the dollar, which was a product, among other things, of the expectation that the Federal Reserve will maintain a restrictive monetary stance during the coming months.
In addition to economic indicators, several Fed officials commented that it might be appropriate to keep the interest rate unchanged through the fourth quarter of 2024, and one mentioned that it might be appropriate to start cuts through 2024.
Other factors that strengthened the dollar were global risk aversion due to an escalation of military conflicts in the Middle East and increased exchange rate volatility.
During April, exchange rate volatility rose to 12.03 percent, being the highest since November 2023.
The greater volatility, explained Banco Base, reduces the attractiveness of carrying out carry trade operations involving the Mexican peso. It should be remembered that in the carry trade, investors look for countries like Mexico with high interest rates, but also exchange stability, to avoid sudden losses.
For its part, at the beginning of the month the 2-month implied volatility in the options market rose to 13.4 percent, a period that coincides with the elections in Mexico and indicates that the market perceives a greater risk of depreciation of the peso during June.
In the accumulated 2024, the Mexican peso shows a depreciation of 0.99 percent or 16.8 cents, ranking as the third currency with the lowest depreciation, only after the Hong Kong dollar with 0.16 percent and the Indian rupee with 0.27 percent.
Markets
The capital market closed the month with losses among the main global stock indices. The losses, analysts noted, were mainly due to the expectation that the Fed will keep its interest rate elevated for longer.
In Mexico, the BMV CPI closed the month with a loss of 1.12 percent, falling in 3 of the 4 months of the year. Internally, 23 of the 35 stations recorded losses in the month, highlighting: Orbia (18.97 percent), Mexican Stock Exchange (13.07), Alsea (12.47), Becle (11.22), Grupo Carso (9.04), Bimbo (8.53 ), Arca Continental (7.90), Kimberly-Clark (7.62), Cemex (7.50), Inbursa (7.16) and Femsa (7.06 percent).
In the United States, the Dow Jones registered a 5 percent drop in the month, after 5 consecutive months of gains and being the largest loss since September 2022. The Nasdaq Composite closed the month with a loss of 4.41 percent, cutting a streak of 5 consecutive months of profits. For its part, the S&P 500 closed with a drop of 4.16 percent for the month after 5 consecutive months of gains.
#Closes #peso #depreciation #trading #dollar
– 2024-05-05 17:28:12
