The Mexican peso appreciated 0.21 percent against the U.S. dollar in the first September trading session, trading at 16.96 pesos per dollar. The currency gained 3 cents from the Monday August 31 close, driven by increased demand for peso-denominated assets ahead of government figures expected to influence Bank of Mexico policy decisions. Trading moved within an expected range of 16.95 to 17.08 pesos per dollar.
Rate differential supports peso
The 10-year Mexican bond yield stood at 9.30 percent against a 10-year U.S. Treasury yield of 4.76 percent, maintaining the interest rate premium that has supported the currency. Felipe Mendoza, market analyst at EBC Financial Group, said the attractive rate differential offered by Banxico continues to act as a shock absorber for the peso, but deterioration in manufacturing outlooks and agricultural inflation risks reduce room for further appreciation.
At Banamex, the dollar sold at 17.41 pesos and bought at 16.47 pesos per unit. Mendoza warned that trading on Tuesday 1 September could be volatile, with President Claudia Sheinbaum due to present her Second Government Report at the Patio of Honour of the National Palace, with investors watching for announcements of investments or special projects.
Broader emerging market weakness
The peso’s gain contrasted with losses across other emerging market currencies on the day. The Russian ruble lost 1.13 percent against the dollar. The Hungarian forint fell 0.67 percent. The Chilean peso, Israeli shekel, South Korean won and Malaysian ringgit all weakened, dropping 0.52 percent, 0.46 percent, 0.37 percent and 0.37 percent respectively.
Source: EBC Financial Group
