MexECON Blog

Peso Review - July 2012

The Mexican peso was unchanged against the U.S. dollar in July, ending the month at a spot-market value of $0.0748 (13.37 pesos per dollar).  However, the flat performance masked significant volatility throughout the month.  The currency staged a modest rally in mid-month, only to fall back sharply to an intraday low of $0.0726 (13.77 pesos per dollar) on July 23, prompting Banco de Mexico to intervene in support of the currency.  The peso then recovered in the last week of July. 

Comment:  The peso's performance continues to be dependent on global investor sentiment about the European debt crisis and prospects for U.S. economic growth.  Those factors continue to trump Mexico's continuing good economic fundamentals, including its historically strong growth rate, its relatively high interest rates, its low inflation, and its healthy fiscal policy.  The peso's technical indicators are relatively healthy, with the currency recently staging a good bounce off its 50-day moving average, and it continues to trade above its 20-day average.  Momentum indicators suggest it is modestly over-bought, but given recent history, that probably would not prevent it from rallying strongly if European policymakers can start to address their countries' debt problems.  If the European situation starts to look worse again, I would expect the peso to start weakening again.

Patrick Fearon, CFA
Vice President, Fund Management

                          U.S. Dollars Per Peso
Peso 1207

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