In recent weeks, the price of the dollar against the Mexican peso has shown behavior that, while predictable to some, raises interesting reflections on the current economy and politics. The dollar has remained consolidated at levels close to its recent lowest zone, respecting the $20.10 MXN per unit, a figure that has acted as a solid floor in the foreign exchange market.
However, in recent days, we have observed a significant change: the dollar has started an upward movement, reaching $20.50 MXN today. This rebound reflects not only the inherent volatility of financial markets but also the impact of various political and economic factors at both the national and international levels.
Key Factors Behind the Increase
Political Context in Mexico: Recent political decisions in Mexico have generated uncertainty among investors. The perception of institutional stability is crucial for markets, and recent events have challenged this confidence, driving greater demand for dollars as a safe-haven asset.
Impending Return of Donald Trump to the U.S. Presidency: The possibility of Donald Trump once again assuming the presidency of the United States has also influenced the currency market. Historically, his administration has been synonymous with strict trade policies and a complex relationship with Mexico. This generates expectations of dollar strengthening as markets anticipate potential changes in trade and investment rules.
Global Market Trends: Globally, the strength of the dollar also responds to rising interest rates by the Federal Reserve and the slowdown in other major economies, factors that reinforce the preference for the greenback.
Investment Recommendations
Given this scenario, it is essential to consider investment strategies to take advantage of the opportunities offered by the foreign exchange market:
Portfolio Diversification: Including dollar-denominated assets can act as a hedge against the devaluation of the peso. U.S. Treasury Bonds or ETFs linked to the U.S. market are viable options.
Currency Purchases: If a sustained increase in the dollar’s price is anticipated, acquiring this currency as an asset can be a protective strategy. However, it is crucial to monitor associated costs, such as exchange rates and fees.
Investments in Export-Oriented Companies: Mexican companies with a strong export focus often benefit from a high dollar. Investing in the stocks of these companies can be an attractive option.
International Investment Funds: Consider funds that include assets in dollars or global markets to diversify risks and take advantage of the greenback’s strength.
What Can We Expect?
It is unlikely that the dollar will return to levels below $20 MXN in the short term. The resistance observed at $20.10 has proven to be a key point, supported by both technical and economic fundamentals. This scenario poses a challenge for economic actors in Mexico, from companies exposed to the international market to citizens facing higher import costs.
The behavior of the dollar against the peso reflects not only the complexities of the financial market but also the deep interactions between economy and politics. For those operating in a globalized environment, such movements should serve as an invitation to redouble efforts in financial planning and risk diversification.
At Bernez, we understand the importance of these decisions and are here to help you navigate this dynamic environment with tailored information and strategies.