Peso loses after fears of escalation in the Middle East

Mexico City. The Mexican peso depreciated more strongly this Friday than other global currencies, shaping up to culminate a week of heavy losses, following news of an Israeli attack on Iranian soil that prompted investors to get rid of risky assets.

The local currency MXN=, one of the most liquid among emerging markets, was trading at 17.2380 per dollar, with a depreciation of 0.95 percent compared to the reference price of Reuters on Thursday, moving away from its strongest level in almost nine years of 16.2559 units, which it reached last week.

“The feeling is nervous, without a doubt there is a lot of tension,” he told Reuters Jacobo Rodríguez, financial specialist at the Roga Capital firm.

The Israeli onslaught triggered an abrupt collapse of the peso of almost 5 percent to 17.9040 units in its operations in Asia on Thursday night, but losses in the markets softened after Tehran minimized the impact of the attack and said it had no plans for immediate retaliation.

Domestically, the currency found support in a report that showed retail sales grew in February after three months of declines, supporting the argument that the economy’s progress could allow the central bank to maintain its restrictive monetary policy, one of The factors behind peso strength.

Even so, the currency added a weekly decline of 3.7 percent, its worst performance since October 2023, and analysts agreed that in the short term investors will continue to be very attentive to tensions in the Middle East.

“This weekend will be very relevant to see how this geopolitical conflict evolves,” Rodríguez added.

According to the Actinver firm, a worsening of tensions would exacerbate volatility and the search for safety in instruments such as the dollar, Treasury bonds and gold. On the contrary, if the situation does not escalate, the peso would stabilize at levels around 17.00-17.30 per dollar.

The Mexican Stock Exchange (BMV) advanced marginally in its first negotiations this Friday.

The leading index S&P/BMV IPC .MXX, which groups together the most traded shares in the domestic market, rose a slight 0.02 percent to 55,750.79 points, although shortly before it lost 0.29 percent in a market also with its sights set in the first quarter corporate earnings season.