Title: Mexican Peso Hits Eight-Year Low Against US Dollar, Bounces Back
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The Mexican peso experienced a rollercoaster ride in the foreign exchange market before breaking the line of 16.80 units per dollar. Despite the slight rise of the greenback, the peso hit a new low not seen in nearly eight years, extending its weekly advance.
Closing at 16.7383 units per dollar at the end of the week, the peso showcased a significant improvement compared to the official close of 17.1444 pesos the previous Friday, according to data from the Bank of Mexico (Banxico). This remarkable shift equates to a loss of 40.61 cents in five days or 2.37 percent against the US dollar.
During the day, the peso gained 10.08 cents, or 0.60 percent, compared to the previous close of 16.8391 units. This reversal in the peso’s fortune can be attributed to improved market sentiment following positive US inflation data and strong quarterly reports from American banks.
Hitting a daily low of 16.7169 units per dollar, a level not seen since December 2015, the peso exhibited its resilience. Just a day earlier, it reached a high of 16.9800 pesos after activating purchase operations on a crucial support level.
In contrast, the Dollar Index (DXY), which compares the US dollar against a basket of six major currencies, rose by 0.15% to 99.92 points at the close. This rebound comes after four days of losses, though the index recorded a weekly drop of 2.24%, marking its worst performance in eight months since November.
The slowdown in US inflation data for June has raised the possibility of the Federal Reserve ending its rate hike cycle sooner than expected. As a result, the dollar has encountered headwinds, with US Treasury yields also showing weakness.
Market analysis tool Fed Watch from CME Group indicates a 95% probability of the Fed raising its rate by 25 basis points to 5.25% to 5.50% at the July 26 meeting. However, for the remainder of the year, the likelihood of a similar increase in November is only 31% possible.
“The markets are discounting with a 95% probability that an increase of 25 basis points by the Fed will materialize at the meeting on July 26, but no more during the rest of the year,” explained analysts from Monex Grupo Financiero in a foreign exchange report.
Despite the volatile market conditions, the Mexican peso continues to be one of the best-performing currencies in the region, ranking only below the Colombian peso. Since December, when it closed at 19.5089 pesos, the Mexican currency has witnessed an improvement of 2 pesos 77 cents or 14.20 percent.
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