(Bloomberg) — The Mexican peso rose to its strongest level since October and is headed for its longest winning streak in a decade ahead of the central bank’s decision scheduled for Thursday.
The currency advanced this Wednesday for the ninth consecutive day 0.6% to a daily maximum of 20.1564 per dollar, surpassing the previous maximum of 2022 seen on February 23. It is now on track to test the next resistance level at 20.00 pesos per dollar, last seen on September 23.
The peso has already broken its 50, 100 and 200-day moving averages since it started rising on March 11 and is now up 3.8% in that period, outperforming all emerging market currencies except the Russian ruble.
© Bloomberg
MXN has strengthened past major moving averages, now eyes 20 key level
Whether that strength lasts depends largely on the Bank of Mexico. The central bank is widely expected to raise interest rates by 50 basis points on Thursday and the swap market is pricing in at least another 250 basis points of hikes in the next three quarters, with six rate decisions scheduled. That leaves little or no room for policymakers to signal a moderation in the pace of hikes. The peso is regarding to lose some of its recent gains in the absence of a more restrictive message.
The options market shows that investors are not too worried regarding the peso weakening in the future. The three-month risk reversal is now hovering around 2.58%, the lowest level since February 10, long before the war in Ukraine broke out. The gauge traded as high as 4.3475% on March 8, a sign of a higher cost to hedge once morest depreciation, the highest since mid-2020.
original note:
Mexican Peso Climbs to Highest Since October, Eyes 20 Per Dollar
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
