MexECON Blog

Peso Review - March 2012

In March, the Mexican peso rose 0.4% against the U.S. dollar, closing the month at a spot-market value of $0.0778 (12.85 per dollar).  The peso has now gained against the dollar for three straight months, but one look at the chart reveals that the currency is actually stuck mostly in a trading range between about $0.0778 (12.85 per dollar) and $0.0790 (12.66 per dollar).  In March, the peso moved above the top of that range a couple of times during the first third of the month.  It then plumbed the bottom of that range in the latter part of the month.  By month's end, however, the currency was just about where it began. 

Comment:  Mexico's good economic growth, healthy fiscal policy, and relatively high interest rates should still put upward pressure on the peso in the near term.  A more sedate external environment should also help, although somewhat softer economic data from the United States in recent weeks has taken some of the wind out of the currency's rally.  Technical indicators are inconclusive:  The peso's current trading range is centered on its 20-day and 50-day moving averages, and its momentum indicators are neutral.  When the currency finally breaks out of its current range, I would expect it to break higher rather than lower, but there is no telling when that would happen.  For the time being, the peso's next resistance level is at the top of the current trading range, at $0.0790 (12.66 per dollar).  Its next support level is at the bottom of the current trading range, at $0.0778 (12.85 per dollar).

Patrick Fearon, CFA
Vice President, Fund Management

                                   U.S. Dollars Per Peso
                            Source:  TradingCharts.com
Peso 1203

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