MexECON Blog

Peso Review - November 2013

In November, the Mexican peso fell 0.7% against the U.S. dollar, closing the month at a spot-market value of $0.0763 (13.11 pesos per dollar).  That marked the first decline in the currency after increases of 0.5% in October and 2.3% in September.  Even though the pullback in November was fairly modest, the currency actually was rather volatile up to mid-month, posting first a sharp slide and then a big rebound before trending downward throughout the last two weeks of the period.

Comment:  As I forecast last month, the peso suffered in November in response to investor concerns about the next set of fiscal deadlines in the United States and the potential for the Federal Reserve to begin tightening monetary policy.  As incoming data pointed to a potential reacceleration in the U.S. economy, the fears of monetary tightening became even more pronounced.  They were even enough to offset positive news that the Mexican economy returned to growth in the third quarter after a decline in the second quarter.

Looking forward, I expect the peso to continue trading largely on global sentiment about U.S. fiscal and monetary policy.  Actual monetary tightening may still be farther off in the future than many observers expect, but that may not stop investors from adjusting their portfolios in anticipation.  Buying sentiment for the peso is likely to be weaker than it has been in the recent past.  Technical indicators are, on balance, pointing modestly downward as well, with the currency now trading below its 20-day moving average, its 20-day moving average below its 50-day moving average, and momentum indicators essentially neutral.  Nevertheless, the peso is not far off from a potential near-term bottom.  Its next notable support levels are at approximately $0.0753 (13.28 pesos per dollar) and $0.0748 (13.37 pesos per dollar).  Its next notable resistance level is at approximately $0.0765 (13.07 pesos per dollar).

Patrick Fearon, CFA
Vice President, Fund Management

                                                          U.S. Dollars Per Peso
Peso 1311

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