Economic pessimism invades markets; dollar closes at 18.86 pesos

Mexico City. In a highly volatile session, the Mexican peso erased its morning gains and rebounded to a high of 18.86 per dollar on Thursday.

The Mexican currency registered a daily depreciation of 0.75 percent, equivalent to 14.01 cents against the US currency, to close at 18.7721 units per spot dollar, a level not seen since the close of June 6, when it stood at 17.8881 per dollar in the wholesale market.

According to data from the Bank of Mexico (BdeM), the exchange rate operated between a maximum of 18.8600 units and a minimum of 18.5950 units.

Faced with an uncertain geopolitical scenario and various actions by central banks around the world, investors are moving their investment portfolios and unwinding positions in some financial assets, such as the Mexican peso, which was among the three most depreciated currencies worldwide during the day.

On the first day of August, investors continued to analyze that the United States Federal Reserve (Fed) paved the way for a rate cut in September; while the inflation risks that Mexico presents would cause the Bank of Mexico to delay the reduction of the cost of credit, since the Japanese yen continues to maintain its strength, causing more pesos to be sold in the market.

Meanwhile, the dollar index, the DXY, which measures the performance of the US currency against a basket of six international currencies, appreciated 0.26 percent, to 104.130 units.

During the session, it was highlighted that the US manufacturing ISM stood at 46.8 points, below the market expectation of 48.8 and linking four consecutive months of falls, something that had not happened since October 2022 to January 2023 and standing at its lowest level since November of last year and in contraction zone.

Meanwhile, the weakness in the industry increases the possibility that the Fed could reduce interest rates in September. Against this backdrop, the rate on 10-year Treasury notes fell today to 3.97 percent.

Economic weakness

On Wall Street, stock markets closed lower. US stock averages fell, led by the Nasdaq, amid concerns about the slowdown in the world’s largest economy.

The main index, the Dow Jones Industrial Average, which includes the shares of 30 of the largest companies, fell 1.21 percent to 40,347.97 points. The S&P 500 index, which comprises 500 stocks, lost 1.37 percent to 5,446.68 points. The technology-heavy Nasdaq index fell 2.29 percent to 17,195.61 points.

The day had started on a positive note after the Federal Reserve decided to keep its rate unchanged yesterday, but with an optimistic message about the possibility of cutting it in September. But later fears about the economy arose.

The Mexican Stock Exchange (BMV), for its part, fell 1.27 percent, equivalent to 676.49 units, to close at 52,417.48 points.

Brent crude oil for delivery in October closed Thursday on the London futures market with a loss of 1.63 percent, to $79.52. Meanwhile, West Texas Intermediate crude in the United States rose 0.9 percent, to $78.63.

The assassination of a Hamas leader in Iran raises the threat of a wider conflict in the Middle East and concerns about its impact on oil prices.