Mexican currency is ready for crisis-Reuters
2022.12.07 06:40
Mexican currency is ready for crisis-Reuters
Budrigannews.com – A Reuters survey of currency strategists found that confidence in the country’s moderate policies and manageable debt metrics will continue to be high, so the Mexican peso will weaken only slightly in 2023 as a result of an approaching economic slowdown.
Mexico’s currency is now close to its highest levels since before the coronavirus pandemic began, having increased by 2.2% since the beginning of the fourth quarter to 19.73 per U.S. dollar on Monday.
The median estimate of 22 strategists polled from December 1 to December 5 predicts that the peso will change hands at 20.16 per U.S. dollar in one year. This is 2.2% lower than this week, but it falls within the 18.0-22.0 range that has existed for the past five years, with the exception of a drop in early 2020.
A weakening economy and the way Banxico, as the central bank is known, continues to adapt to the U.S. Federal Reserve’s anti-inflation strategy are the main obstacles for the Mexican currency in the medium term.
Private sector analysts anticipate that growth in neighboring Mexico will slow to 0.95 percent next year from 2.8% in 2022, despite growing concerns about a possible contraction in the world’s largest economy in 2023.
Ricardo Aguilar, chief economist at Invex, predicted that the peso would reach 21.15 per U.S. dollar in a year and that “the U.S. recession will impact Mexico’s growth and USD flows into the economy could fall.”
However, Fitch Ratings highlighted the prudent policies of President Andres Manuel Lopez Obrador’s government and Banxico’s conservative approach last month, supporting financial sentiment in Mexico.
Since the middle of 2021, the key interest rate in Mexico has increased by 600 basis points to 10.0%. Governor Victoria Rodriguez of Banxico has stated that at least one additional increase is imminent.
The Brazilian real has increased by 5.5%, while the peso has increased by 3.9% year to date.
According to the survey, Brazil’s currency would rise by 2.1% to 5.17 pesos for every US dollar in a year.
Contrary to some extreme market views, traders are maintaining a cautious attitude as Brazil’s President-elect Luiz Inacio Lula da Silva takes his time selecting his cabinet, as reflected in the Reuters foreign exchange survey from last month.
In the face of renewed concerns about inflation and calls for increased spending, the currency may be supported by a stance at the central bank that may be more stringent than anticipated. This may result in tighter policy than anticipated.
