Chihuahua—The second round of appointments to the cabinet of President-elect Claudia Sheinbaum, the beginning of the forums to debate the Judicial Reform and the announcement of the interest rate that the Bank of Mexico (Banxico) will make, are seen as part of the stress factors for the exchange rate that come together this day.
According to the analysis of Banco Base, which registered in Chihuahua an increase of more than 300 percent in the acquisition of coverage by exporting companies to protect themselves from exchange volatility, these factors must also be added to the first presidential debate of United States, between Joe Biden and Donald Trump.
Yesterday, the Mexican currency began the day with a depreciation of 1.04 percent. The exchange rate hit a minimum of 18.0681 pesos per dollar and a maximum of 18.3320 pesos per dollar. With the above, the national currency accumulated a drop of 7.50 percent or one peso and 27 cents so far in the month of June.
During the rest of the day, the peso showed downward variations until the close of the day.
These fluctuations, announced Nicolás Eguiarte, director of Commercial Development at Banco Base, have increased the exchange coverage offered by the institution in the Chihuahua market by 316 percent so far in June, mainly the one with the greatest growth in the country. for its export activity.
This volatile environment, he considered, will persist as the Judicial Reform is debated, while the president-elect presents her entire cabinet and in the United States the presidential election advances, which since 2012 did not coincide with the succession in Mexico.
Historically, said Eguiarte, in each election in Mexico there is a depreciation of between 12 and 15 percent of the peso, which could be seen in a marked way in recent days and will continue to be noticed in the coming months, which makes it necessary for companies, especially in exporting states, to look for instruments that give them protection against fluctuations in the exchange rate.
Stress factors in the immediate setting
This day, various stress factors or factors that influence the exchange rate due to the decisions made by investors will have to appear during the day. The national and international public agenda, which the markets anticipated since yesterday, includes activities from the morning until late at night, which could have consequences until the exchange day on Friday and subsequent days.
The team of the president-elect, Claudia Sheinbaum, met at 11:00 in the morning at the Interactive Museum of Economy in Mexico City to present a second round of appointments of those who will make up her cabinet, which will take office on first of October.
Last Thursday, Sheinbaum Pardo announced the first six names of his team, which was well received by the markets and stabilized the peso-dollar parity for a few days.
Then, at one in the afternoon, the Governing Board of the Bank of Mexico (Banxico) will announce its monetary policy decision that sets the interest rate or the cost of access to credit.
Last March, Banxico reduced the benchmark for the first time since February 2021, from 11.25 to 11 percent. Although in that month the beginning of a cycle of lowering the reference rate seemed possible, on this occasion, with the inflation data rising this week, the expectations of economic sector specialists indicate that the central bank should remain at that same level.
Another factor that affects the perception of the markets is the beginning of the forums to debate the Judicial Reform proposed by President Andrés Manuel López Obrador, who intends to change the federal justice model to elect district judges, magistrates and ministers of the Supreme Court. Court of Justice of the Nation (SCJN) by the direct vote of the population.
To carry out this reform, the Morenoist majority in the Chamber of Deputies organized eight regional forums in various parts of the country, so that all interested parties could participate. This day at five in the afternoon in San Lázaro the first will be held, with the theme “What Judicial Power do we have? “What Judicial Branch do we want?”
To close the day, at nine at night in Atlanta, Georgia, United States (7:00 p.m., Mexico time), the first debate of the candidates for the Presidency of the neighboring country, Joe Biden, the president who seeks re-election; and Donald Trump, former president nominated again.
Biden and Trump have faced each other in debates on two previous occasions, not in the current contest but in previous ones, and according to the American media, the candidates are expected to toughen their positions and discourse in this exercise, with strong references to the relationship with Mexico, which also shows an impact on the exchange rate and other variables of the economy and finances of both countries.
Banco Base identifies risks for Mexico
Banco Base’s analysis identified yesterday that the markets continue to see the upcoming reform of the Judiciary and the elections in the United States as risks for Mexico, but also the country’s large fiscal deficit and the marked Mexican and American economic slowdown.
“It is worth remembering that tomorrow (today) the first presidential debate between Joe Biden and Donald Trump will take place, and volatility cannot be ruled out in the event that accusations are made regarding Mexico on issues of trade, organized crime or migration,” the financial institution noted.
“The depreciation of the peso is also due to caution in anticipation of the Bank of Mexico’s monetary policy announcement scheduled for tomorrow at 1:00 p.m. Grupo Financiero Base estimates that the Governing Board will maintain the interest rate unchanged at 11 percent, because inflation continues to show upward pressures as the depreciation of the peso raises the risk of acceleration of inflation in the coming months. .
The exchange rate – he reported – began to rise in Tuesday’s session, due to the advance purchase of dollars and the taking of exchange hedging, because the risk of depreciation of the Mexican peso and volatility of the exchange rate in the coming months persists. .
The dollar remains strong amid the possibility that the United States Federal Reserve (Fed) will keep interest rates unchanged before the end of the year. Late Tuesday, Fed Governor Michelle Bowman reiterated that she expects high inflation for “some time” and that it is not appropriate to begin cutting the interest rate.
Thus, the dollar advances 0.38 percent according to the weighted index, gaining against most of its main crosses and reaching its highest level since November 2, 2023.
In the broad basket of main crosses, the most appreciated currencies yesterday were: the Russian ruble with 1.16 percent, the South African rand with 0.34 percent, the Australian dollar with 0.20 percent, the Chilean peso with 0.14 percent and the Turkish lira with 0.13 percent.
The most depreciated currencies were, among others, the Mexican peso with 1.04 percent, the Brazilian real with 0.87 percent, the Swedish crown with 0.66 percent, the Polish zloty with 0.59 percent and the Japanese yen with 0.39 percent.
In the currency market, the Mexican currency has been the most depreciated in recent weeks, but the Japanese currency yesterday reached a price of 160.41 yen per dollar, its worst level against the US currency since 1986, which raised the probability that the Japan’s government is forced to intervene in the market to support its currency.
This is the framework, considered Banco Base, that has increased the demand for coverage or “insurance” to protect against fluctuations in the exchange rate, mainly in companies that buy or sell in dollars.
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