The exchange rate reached 21.0240 pesos per dollar this Monday in the electronic market, placing the Mexican currency at its worst level since March 9, 2021 when it closed at 21.2000 pesos per dollar.

The benchmark closing of Banco de México (Banxico) was located at 20.9821 pesos per dollar, which meant a depreciation of 0.77% or 16 cents compared to the 20.8221 units in which it closed last Friday, thus accumulating its third consecutive day loss against the US dollar.

Until 9:00 pm, Mexico City time, the exchange rate stood at 21.0151 pesos per dollar, 0.16% depreciation after the close of the Banxico day.

The dollar started the week with gains, trading near its 16-month high on growing nervousness over rising Covid-19 infections in Europe, with Austria reimposing a full 20-day lockdown and Germany considering doing the same soon. .

Returning fears of a new closure of activities, investors seek safe haven assets such as the dollar, while emerging currencies such as the peso lose ground against the dollar.

The dollar index, which measures the strength of the US currency against a basket of six reference currencies, closed this Monday at 96.50 points, this was an increase of 0.45% compared to last Friday and thus accumulating an increase of 2.10% so far this month.

According to German Chancellor Angela Merkel, the recent increase in Covid-19 infections is the worst that has been experienced since the pandemic began. While the German health minister, Jens Spahn, said that “by the end of winter practically everyone in Germany will be vaccinated.”

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Powell’s nomination also moved the weight

Another reason that pushed the dollar higher was the nomination by President Joe Biden of Jerome Powell for a second term at the helm of the United States Federal Reserve.

“Powell’s nomination for a second term suggests a less cautious outlook for monetary policy than under potential Brainard leadership,” said Joe Manimbo, market analyst at Western Union Business Solutions.

Gabriela Siller, Director of Economic Analysis at Banco Base, explained that “the reaction of the exchange market against the dollar is interpreted as a confirmation of the expected trajectory for monetary policy, since the bond purchase program is expected to conclude in the middle of the 2022 and that the interest rate increases begin in the second half of 2022 ”.

From a technical point of view, Siller added, once the level of 21.00 pesos per dollar has been pierced, the probability of episodes of volatility increases and the exchange rate could reach levels between 21.20 and 21.40 pesos per dollar.

Janneth Quiroz, deputy director of Economic Analysis at Monex, indicated that inflationary pressures are other factors that continue to drive investors to seek safe haven assets such as the dollar.

“Part of the factors that reflect the greater aversion to risk in the markets has to do with the inflationary pressures that have rebounded in recent publications, and it is possible that we still do not see an inflation ceiling, with this what woke up was the fact that several central banks could withdraw their monetary stimuli early, “he said.

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In particular, Quiroz pointed out, “in the United States Federal Reserve we see a tone where there are signs that, if these levels of economic growth and the pressures on prices continue, it will be necessary to withdraw the buyback of bonds more quickly.”

He said that “the dollar will possibly continue with the upward trend, although there is no expectation of reaching 22 pesos per dollar in the short term.”

The strengthening of the dollar was reflected in the prices of the main emerging currencies. The Turkish lira ended the day at 11,3040 units per dollar with a depreciation of 2.48%, while the South African rand lost 1.71% against the dollar and the Russian ruble depreciated 1.71% in the session.

For its part, the Japanese yen ended at a level of 114.8310 units per dollar with a loss of 0.95% against the dollar.

The Mexican peso ranked fifth among the depreciated currencies yesterday, with a depreciation of 0.77% until the closing of Banxico, and the Brazilian real lost 0.59% and reached 5.5857 reais per dollar.

“We begin this week with the continuation of the strengthening of the dollar against all currencies, in a scenario where there is increasing speculation about an increase in rates by the United States Federal Reserve in anticipation of what the market had discounted”, Intercam Banco analysts wrote in a report.

For its part, the euro, despite the increase in Covid-19 infections in some countries on the continent, registered an appreciation of 0.43% on the day against the dollar and stood at 1.1237 units per greenback.

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The British pound strengthened 0.37% on Monday against the dollar, while the Swiss franc gained 0.35 percent.

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