Exchange Rate update: Peso Drops vs. Dollar

Know the price of the dollar today in banks.

When starting operations, the price of the dollar today, Monday, was up to 19.67 pesos in banks. Meanwhile, the interbank exchange rate is located at 19.17 pesos per dollar, with a loss of 0.24 percent.

Citibanamex sells the dollar at 19.67 pesos, while BBVA México at 19.44, Banorte at 19.40 pesos and Banco Azteca at 19.19 units.

The peso depreciated after five consecutive days of gains, at the beginning of a week loaded with relevant economic information in the United States that could offer new signals about the next steps of the Federal Reserve.

How is The Exchange Rate?

According to Banco Base, the peso began the session with few changes: an appreciation of 0.04 percent and a value of around 19.14 units per dollar, with the exchange rate at a maximum of 19.16 and a minimum of 19.10 pesos.

With the above, the peso accumulated six consecutive sessions of appreciation, in which it advanced 1.82 percent (35.5 cents).

The Appreciation of The Peso Today is Due to The Following Factors:

The weakening of the dollar as speculation about monetary policy in the United States decreases. Well, the employment report in that country showed that wages grew at a monthly rate of 0.3 percent, so the market considers it more likely that the Federal Reserve will moderate the rate of interest rate increases.

As well as the greater appetite for risk globally. Over the weekend, a new phase of economic opening began in China by easing travel restrictions, which allows gains for energy prices in the raw materials market.

For its part, the WTI started the week with gains: it increased 3.39 percent, to 76.27 dollars per barrel.

In the capital market, Japan’s Nikkei 225 advanced 0.59 percent in the Asian session, while in China, Hong Kong’s Hang Seng advanced 1.89 percent.

In Europe, the CAC 40 of France advanced 0.30 percent and the DAX of Germany 0.63 percent.

In the futures market, the S&P 500 advanced 0.44 percent and the Nasdaq 100 gained 0.58 percent.

Among the main dollar crosses, the most appreciated currencies today are: the Russian ruble with 3.64 percent, the South Korean won with 2.00 percent, the Norwegian crown with 1.02 percent and the New Zealand dollar with 0.84 percent.

Among relevant currencies, the British pound advanced 0.63 percent, and costs $1.21 per unit, while the euro advanced 0.61 percent, and is worth $1.07 per unit.

In Mexico, inflation for the second half of December stood at 0.10 percent fortnightly and 7.86 percent annually, up from 7.77 percent in the first half of December.

With the above, in December general inflation was located at 0.38 percent monthly and 7.82 percent annually. In 2022, average headline inflation was 7.89 percent, its highest level since 2000 (9.51 percent).

Although there are still inflationary pressures, the most recent inflation data is good news, as they begin to show signs that inflation could decrease in 2023.

In the second half of December, core inflation stood at 0.19 percent fortnightly and 8.34 percent annually, as pressure on the merchandise component decreased, which showed biweekly inflation of 0.36 percent, particularly non-food merchandise with a increase of 0.15 percent.

For its part, the services component showed biweekly inflation of -0.02 percent, as air transport services (-18.26 percent), package tourist services (-8.78 percent) and pay television services (-0.12 percent) decreased. percent).

The foregoing, in combination with a high base of comparison, allowed core inflation for December to drop from 8.51 percent in November to 8.35 percent in December, the first decrease after 24 consecutive months of acceleration at the annual rate.

At the monthly rate, core inflation was 0.65 percent, below the 0.80 percent observed in December 2021 but still at a high level compared to historical levels for the month (average of 0.38 percent between 2003 and 2020).

It will be important for price pressures to subside, and it is still too early to confirm the start of a downward trajectory for core inflation at the annual rate.

The non-core component, which includes products with more volatile prices, showed biweekly inflation of -0.19 percent and annual inflation of 6.46 percent. This allowed monthly inflation to be -0.40 percent and annual inflation of 6.27 percent in December.

In the interior, a rebound was observed in fruits and vegetables, which advanced at a monthly rate of 1.21 percent, but this was partially offset by livestock products, which fell 0.08 percent compared to November.

For its part, the energy component showed negative inflation of 1.71 percent in December.

At a fortnightly rate, the energy component accumulates three consecutive fortnights of decline and in the second fortnight of December the fall in the price of natural domestic gas (-6.35 percent), LP domestic gas (-4.64 percent) and high octane gasoline (-0.04 percent).

It should be remembered that energy prices, particularly LP gas, have fallen due to government efforts to control prices.

For 2023, the inflation expectation of 5.10 percent at the end of the year is maintained, as the pressures on the core component decrease and due to decreases in prices of the non-core component, mainly energy.

However, it must be remembered that 5.10 percent is a very high level and is located 2.10 percentage points above the Bank of Mexico’s objective of 3.0 percent.

Due to the above, it is expected that the Governing Board will raise the interest rate again on February 9 and it is very probable that during the year they will maintain a restrictive monetary stance.

For its part, the National Producer Price Index (INPP) registered a decrease of 0.19 percent in December, with which it has fallen for five months, something not seen since the period from September 2014 to January 2015.

The decrease was once again the result of a drop in oil prices, since the only sector where a decrease in prices was observed was the secondary sector, including oil (-0.60 percent).

When excluding the price of oil from the rest of the goods and services in secondary activities, an increase of 0.22 percent is recorded in prices. For their part, prices for primary and tertiary activities showed increases of 0.16 percent and 0.57 percent.

As mentioned, the decrease was caused by the fall in the price of oil; however, the INPP without oil showed an increase of 0.33 percent, this being its first positive variation in three months and the highest since July.

The following publications in the United States will be key for the week: wholesale inventories on January 10, consumer inflation for December on January 12, where the market expects it to be at 6.5 percent, and preliminary data on January 13. from the University of Michigan Consumer Confidence for January.

During the session, the exchange rate is expected to trade between 19.08 and 19.19 pesos per dollar.

In the United States, the 10-year Treasury note rate shows an increase of 2.6 basis points, and stands at 3.58 percent.

In Mexico, the 10-year M bond rate showed an increase of 2.4 basis points, and stands at 8.58 percent.

To hedge against a depreciation of the peso beyond 20.00 pesos per dollar, a call option, with an exercise date within one month, has a premium of 0.84 percent and represents the right, but not the obligation, to buy dollars at the aforementioned level.

On the other hand, the interbank forward for sale is at 19.28 for one month, 19.80 for six months and 20.43 pesos per dollar for one year.

The euro is sold at the window at a maximum of 21.13 pesos and is bought at 20.60 pesos. For its part, the pound sterling is offered at 23.60 pesos and bought at 23.36 pesos.

The Bank of Mexico (Banxico) registered in the previous session an exchange rate of 19.17 pesos per dollar.

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