Mexico: Mexican peso breaks 14.0 MXN per USD psychological barrier
December 4, 2014
The Mexican peso has faced strong volatility in recent weeks due to a combination of factors. These factors include speculation that the recent sharp fall in oil prices will curb foreign investment as the country opens its energy sector to private investments and that investors’ viewpoint on how the U.S. monetary policy will affect emerging market currencies is changing.
On 4 December, the peso traded at 14.10 MXN per USD, which marked the first time since June 2012 that the Mexican currency has broken the 14.0 MXN per USD psychological barrier. This means that the peso is at a technical level that may trigger options payments or prompt traders to short the currency. The peso has lost 4.6% of its value against the U.S. dollar over the past month and it has lost 6.7% in annual terms.
Despite the drop in the peso’s value, Mexican authorities recently stated that they do not see a need to intervene in the foreign exchange market. The economy is closely linked to the U.S. economy and Mexico’s recently-approved structural reforms are expected to attract meaningful capital inflows.
Author: Ricardo Aceves, Senior Economist