Peso Loses Before Dollar Advance; Banxico Decision on Interest Rate

When starting operations, the price of the dollar today, Thursday, was up to 21.03 pesos in banks. Meanwhile, the interbank exchange rate stands at 20.53 pesos per dollar, with a fall of 0.23 percent. Citibanamex sells the dollar up to 21.03 pesos, while BBVA Mexico does so at 20.75, Banorte at 20.75 pesos and Banco Azteca at 20.48 units. The peso depreciated after the dollar hit a new one-year high amid expectations that the Federal Reserve will reduce its monetary stimulus starting in November, as the market waits for dollar-price-30-September-2021-exchange-rate-Mexico.

How is the exchange rate going? Banco Base published in its report that the peso starts the session with little change compared to yesterday’s closing, showing a moderate appreciation of 0.06 percent or 1.2 cents and trading around 20.50 pesos per dollar. “The stability of the exchange rate is due to a break in the exchange market after sustained losses were observed against the dollar since last week. This morning, the weighted index of the dollar shows a decline, albeit moderate, of 0.07 percent , being the first since last Thursday, “he said. The decrease in risk aversion is mainly due to the fact that in the United States the Democrats and Republicans agreed to vote separately on both the debt limit and the government financing, which will avoid a partial closure of operations as of the new fiscal year October 1st. “Today’s vote will allow the government’s financing to be extended until December 3 of this year. For its part, the budget will be voted on which includes spending on infrastructure, which is unlikely to be approved immediately, therefore that the negotiations will probably continue during October, “he said.

He highlighted that the main risks that have caused weakness in financial markets since the previous week are still present and are expected to influence the performance of the markets in the fourth quarter of the year. These factors are: The expectation of inflationary pressures at a global level in the context of higher transportation costs and energy prices, The expectation of a less flexible monetary policy in the United States, which could initiate increases in the interest rate in the second mid-2022. The risk of a further economic slowdown in the fourth quarter due to the stagnation of the services sector, as the coronavirus pandemic has not ended, while high energy costs, high transportation costs and a shortage of components, inhibit the growth of industrial activity.

Regarding the latter, the Chinese manufacturing PMI for September was published at night, which stood at 49.6 points, indicating contraction (below 50 points) for the first time since February 2020. The indicator has fallen for six months. consecutively from 51.9 points in March. In the session, the most relevant event for the performance of the exchange rate will be Banco de Mexico’s monetary policy announcement scheduled for today, where Grupo Financiero Base anticipates an interest rate increase from 25 basis points to 4.75 percent. Regarding economic indicators, in the United States the initial applications for unemployment were published, which increased by 11 thousand compared to the previous week, spinning three consecutive weeks on the rise. Thus, the initial applications were located at 362 thousand above the market’s expectation of 330 thousand, a sign that the labor market continues to face difficulties in its recovery. On the other hand, the third estimate of the GDP of the United States for the second quarter was published, which showed a slight upward revision of 0.1 percent, going from 6.6 to 6.7 percent annualized quarterly.