The Mexican Peso (MXN) prolonged its losses by more than 0.50% versus the US Dollar (USD) after the Bank of Mexico (Banxico) decided to slash its hedg
ing program due to stabilizing the USD/MXN exchange rate amid geopolitical and Covid-19 uncertainty. Hence, the pair trades at 17.1792 after hitting a daily low of 17.0430.
Mexican Peso weakens further after the Bank of Mexico’s decision to cut hedging, despite mixed US employment figuresthat Banxico would reduce its currency hedging program sent the USD/MXN pair into a tailspin, as the program was designed to tame volatility, seen by traders as an exit signal from its long positions. On August 31, the USD/MXN posted more than 1.70% gains after Banxico’s decision. rose to 187K in August versus 170K expected and 157K prior .
Other data The US ISM Manufacturing PMI also impressed the US Dollar buyers with the 47.6 figures versus analysts’ estimation of 47.0 versus 46.4 previous readings. In the central bank action, Cleveland’s Fed President Loretta Mester states that the Unemployment Rate remains low, and she still sees the jobs market as quite strong. However, the policymaker remains hawkish and has seen higherOn the Mexican front, Banxico’s Governor Victoria Rodriguez Ceja took off from the table rate cuts, as she added, “The outlook ahead continues to be complex and uncertain. It’s important to remember that disinflation periods are not linear.
Upcoming data will see the release of Mexican inflation figures for August, and the US ISM Non-Manufacturing PMI will give direction to the USD/MXN pair. Nevertheless, expect further Mexican Peso weakness after Banxico’s hedge cuts.The USD/MXN is consolidating, with the pair unable to crack to new year-to-date lows while reversing its course, threatening to edge higher if it reclaims a mult-month downslope resistance trendline and the 50-day Moving Average at around 17.20/17.2900.
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