Peso loses on possible Fed rate cut

The Mexican peso depreciated against the dollar last week as expectations grew that the Federal Reserve would resume its rate-cutting cycle at its September meeting.

According to data from the Bank of Mexico (Banxico), the Mexican currency closed at 18.7412 pesos per dollar, an appreciation of 0.40% or 7.47 cents on Friday, after two sessions of depreciation.

In its weekly comparison, the national currency registered a depreciation of 0.75 percent.

The exchange rate hit a low of 18.5803 pesos per dollar, the lowest level since July 23, and a high of 18.8159 pesos.

This year, the Mexican peso is on track to appreciate 10.26 percent.

The Intercontinental Exchange's Dollar Index (DXY), which measures the greenback against a basket of six benchmark currencies, fell 0.34% to 97.85 points for the week.

Among the broad basket of major crosses, the most appreciated currencies this week were the Argentine peso (2.05%), the Israeli shekel (1.60%), the Colombian peso (0.87%), the Norwegian krone (0.87%), the Indonesian rupiah (0.80%), and the pound sterling (0.76%).

The currencies that fell the most this week were the Peruvian sol (1.02%), the Mexican peso (0.75%), the New Zealand dollar (0.57%), the Taiwanese dollar (0.53%), the Canadian dollar (0.44%), and the Turkish lira (0.44%).

The low was reached on Wednesday, following the release of US consumer inflation for July, which raised expectations that the Federal Reserve would resume its rate-cutting cycle at its September meeting.

Gabriela Siller, director of analysis at Banco Base, believes that from that moment on, the peso depreciated, closing the week as the currency that lost the most against the dollar.

"An upward correction due to the low exchange rate triggering early dollar purchases and currency hedging, which pushed the exchange rate higher," the expert said.

Another point he highlighted was the release of producer inflation, "which diminished expectations that the Federal Reserve will cut interest rates before the end of the year."

Bets on the weight unchanged

Net long or favorable speculative positions on the Mexican peso remained unchanged on the Chicago Board Futures Exchange (CME).

At the CME, they closed this week at 68,100 contracts, identical to the figure seen last week, reflecting a notable stability in international investors' positioning toward the Mexican currency.

Felipe Mendoza, Financial Markets Analyst at the brokerage ATFX LATAM, emphasized that this lack of variation contrasts with previous weeks, which had seen significant movements derived from expectations for monetary policy in the United States and domestic economic data in Mexico.

"The lack of change this time around appears to reflect an environment in which, while there are factors of global volatility, the market has preferred to maintain a wait-and-see attitude rather than undertake significant repositioning," the specialist wrote.