MexECON Blog

Peso Review - April 2014

In April, the Mexican peso was virtually unchanged against the U.S. dollar, closing the month down 0.1% at a spot-market value of $0.0764 (13.09 pesos per dollar).  That followed gains of 1.3% in March and 0.9% in February.  In spite of the limited change over the course of the month, the currency was somewhat volatile in the first part of April, rising as high as $0.0772 (12.95 pesos per dollar) on April 8.  It then fell back to near its starting value for the month and was then relatively stable except for a short-lived dip in the last week of the month.

Comment:  After a volatile period earlier in the year, the peso has started to stabilize.  It appears that global investors have come to terms with the U.S. Federal Reserve's ongoing tapering of its asset purchases.  Moreover, investors have taken the Russian takeover of the Crimean peninsula in stride, and they appear to be encouraged by the recent acceleration in U.S. economic activity.

Looking forward, economic fundamentals for the peso appear constructive.  Mexican economic growth looks set to remain relatively weak for the near term, primarily because of weak domestic demand, but a strong enough acceleration in U.S. demand could potentially lead to an upside surprise.  In any case, the Mexican government is keeping a reasonably good handle on its fiscal policy, the country's debt levels are reasonable, inflation is falling back after a spurt at the beginning of the year, and interest rates remain higher than in many developed countries.  Technical factors also are somewhat constructive.  The peso continues to trade modestly above its key moving averages, though momentum indicators are essentially neutral.  The currency's next notable resistance areas are at $0.0768 (13.02 pesos per dollar) and $0.0775 (12.90 pesos per dollar).  Its next notable support level is at approximately $0.0761 (13.14 pesos per dollar).

Patrick Fearon, CFA
Vice President, Fund Management

                                                     U.S. Dollars Per Peso
Peso 1404

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