Peso ends week with gains; closes at 20.19 per spot dollar

Mexico City. The Mexican peso ended the week with gains, managing to overcome the turbulence caused by Donald Trump‘s victory in the presidential election in the United States last Tuesday, while investors continue to weigh the risks that Trump’s return to the House represents for Mexico. Blanca, who has threatened to impose tariffs on imports and toughen immigration policy.

Although the Mexican currency fell 32 cents (1.65 percent) this Friday, closing in wholesale operations at 20.19 units per dollar, in the midst of a strengthening of the dollar, it managed to recover from a parity of 20.70, its worst level in more of two years, which occurred between Tuesday night, when the voting trend in the United States leaned towards the Republican candidate, and on Wednesday, when his victory as future president of the United States, Mexico’s main trading partner, was confirmed, and where more than 80 percent of Mexican exports are directed.

The retreat of the peso in yesterday’s session was in line with the behavior with a weak performance shown by a large part of the assets abroad, after a new stimulus package in China failed to meet expectations, driving a general climate of exits from risk markets.

Uncertainty

Although the peso managed to overcome volatility, analyst forecasts are not entirely optimistic. “If the political and economic situation continues as it is until now, the expectation is that the exchange rate will approach 21 pesos per dollar in the medium/long term,” said Enrique Bazaldúa, independent foreign exchange market operator.

On the Chicago Mercantile Exchange, speculative positions in favor of an appreciation of the Mexican peso decreased, after having reached their highest level since August last week.

Analysts expect Trump’s proposals – including more tariffs, measures against illegal immigration, lower taxes and business deregulation – to boost growth and inflation. However, in the short term there is uncertainty about what policies will be introduced, and whether some, such as tariffs, could be negotiating tactics.

In addition to the outcome of the contest in the United States, locally, the attention of the markets in midweek began to turn to the monetary policy announcement of the Bank of Mexico, which on Thursday cut the interest rate by a quarter of a percentage point, a days after the Federal Reserve did the same, local figures were also released that showed that, although general inflation accelerated in October, the underlying index continued to decline.

The following week will be marked by the presentation of the Mexican government’s budget package for next year, in which President Claudia Sheinbaum has the challenge of reducing the large fiscal deficit, an issue of concern among rating agencies and investors.

For its part, the reference index of the Mexican Stock Exchange fell 0.89 percent and stood at 51,845.17 points; However, during the week it added a return of 2.42 percent. Yesterday’s behavior in the Mexican stock market was contrary to that of Wall Street, where the main indices closed with gains, even the S&P 500 briefly surpassed the barrier of 6 thousand points and closed with its largest weekly increase in a year, since the overwhelming Donald Trump’s victory boosted the stakes of a pro-business agenda.