The peso was trading at 21.94 per dollar near to session closure, with a decline of 1.78 percent compared to 21.55 of the reference price yesterday. The currency fell during the session to its weakest level in 14 months. In this way the National currency spun seven sessions to the downside dragged by a wave of aversion to risk assets due to concerns that a new variant of coronavirus could slow the recovery of the World economy.
The currency accumulates a loss in the year of more than 10 percent and recorded a fall in the week of 5.36 percent, the largest since the one that ended on September 25 of last year.
The new variant was detected in South Africa. The European Union and United Kingdom are some of the countries that have tightened border controls, while scientists try to find out if the mutation is resistant to available vaccines.
Dollar in banks
- Citibanamex: 22.46 pesos
- Banorte: 22.20 pesos
- BBVA Mexico: 22.11 pesos
- Azteca Bank: 20.38
How did the exchange rate end the week?
Base Bank explained in a report that the peso closed with the third consecutive weekly depreciation and it is also the highest weekly depreciation since September 25, 2020.
The depreciation of the Mexican peso was mainly the consequence of the following three factors, arranged in chronological order:
A strengthening of US dollar. During the week, the dollar weighted index advanced 0.54 percent, reaching a maximum level of 1,192.53, a level not seen since July 2020.
The US dollar strengthened in the first days of the week after the confirmation of Jerome powell as a nominee for a second term at the helm of the Federal Reserve. The decision gave certainty to the market, but it was speculated that the Fed could accelerate the pace at which it will withdraw its monetary stimulus.
Additionally, positive data for the US economy were released, with initial applications for unemployment support reaching 199,000 in the week ending November 20, the lowest level since 1969.
An increase in risk aversion over Mexico. On Tuesday afternoon the withdrawal of the nomination of Arturo Herrera for him Bank of Mexico, which caused uncertainty. Likewise, the surprise announcement about the nomination of Victoria Rodríguez Ceja raises doubts about the future of the central bank’s monetary policy, since, among other things, its position on recent inflationary pressures is unknown.
It should be remembered that, with the most recent information, it is estimated that at the end of the year annual inflation will be around 7.20 percent, its highest level in 20 years.
Real time dollar
“The most worrying thing about the new strain at the moment is how little we know about it, with early indications that it could be more problematic than the Delta. The biggest fear is that it is resistant to vaccines, “he said. Craig erlam, market analyst of OANDA.
“We will certainly know more in the coming days and weeks, but for now, the fear of the unknown will weigh heavily into the weekend and could last until next week,” he added.
In the debt market, the 10-year bond yield fell nine basis points to 7.67 percent, while the 20-year rate fell 11 to 8.08 percent.
With information from Reuters.