October 24, 2022 | 5:00 a.m.
The Mexican peso is one of the few currencies to appreciate against the dollar this year, so some analysts now they refer to the Aztec currency as the ‘super peso’despite Moody’s seeing a significant depreciation.
Moody’s said in a report published last week that the peso will present a 20% correction against the dollar which can happen at the end of 2022early 2023 or until 2024, as central banks withdraw excess liquidity.
Nevertheless, in the year the Mexican peso shows an appreciation against other 28 currencies from a wide basket of the foreign exchange marketaccording to data from Bloomberg.
Gerardo Esquivel, deputy governor of Banco de México (Banxico), wrote about it in recent days on his Twitter account that the appreciation of the peso against its US counterpart it also implies that it wins against other currencies.
The graph shows the strength of the dollar vs. a wide variety of currencies. One of the few currencies that has remained stable against the dollar is the Mexican peso. This implies that the Mexican currency has also appreciated significantly against other currencies. https://t.co/Na3PR1ljSP
– Gerardo Esquivel (@esquivelgerardo) October 17, 2022
The resistance of the peso is due to the fact that the country’s export flows and the arrival of remittances from compatriots are at historic levelsin addition to Foreign Direct Investment (FDI) growing compared to 2021.
In addition, the restrictive monetary policy of the Bank of Mexico (Banxico) due to the high levels of inflation in the country gives an extra boost to the national currency, said Jesús López, deputy director of economic analysis at Banco Base.
This helps prevent strong outflows and the market can continue to speculate that the peso can remain stable
explained in an interview.
Coins that lose the most against the peso
The currencies that depreciate the most against the Mexican peso are the same as are weaker against the dollar in 2022which is driven by the cycle of interest rate hikes in the United States.
The Argentine peso and the Turkish lirathe currencies with the worst performance against the dollar in the same period, are those that accumulate the most pronounced depreciations against the ‘super peso’ of 35.14% and 30.54%, respectively.
Argentina has had double-digit inflation levels for several years, while in Turkey the central bank has lowered the interest rate despite inflationary pressures.
While, the Japanese yen accumulates a depreciation of 23.94% against the pesothe Hungarian forint of 23.84% and the Swedish krona of 21.55%.
the pound sterling, affected by UK government instability in the midst of a slowdown in the economy, it depreciates 18.95% against the Aztec currency.
It may interest you: Depreciation of the pound does not drag down the peso
Only two coins beat the peso
Along with the Mexican peso, the Russian ruble and the Brazilian real are among the currencies that have resisted the strength of the dollar this year. The dollar index (DXY) hit its highest level in two decades last month.
In the year, only these currencies gain ground against the ‘super peso’with an appreciation of 18.51% of the Russian ruble and 5.13% of the Brazilian real.
Depreciation of 20% of the weight?
Moody’s stated that this same scenario occurred following the most recent interest rate hike cycles. Another risk they see is that the Aztec currency is also one of the most sensitive to recession fears.
However, Banco Base considers that for the exchange rate rises from 20 to 24 pesos per dollar As Moody’s proposes, there must be a crisis similar to that of 2008 or 2020 or else the country has high fiscal deficits.
Although Banco Base forecasts that the price will depreciate next year, it places its expectation for the exchange rate at 21 pesos per dollar at the end of the fourth quarter of 2023.