Exchange Rate. US Dollar Volatility
The Exchange rate represents one of companies’ main uncertainties which affect investment and financial decisions. Through the COVID-19 pandemic, the Mexican peso exchange rate vs the US Dollar has increased it’s volatility. The exchange rate behavioral analysis must be given through the flow of the net foreign exchange coming into the country, financial assets and futures market positions.
Published on June, 2020
Ana Karen Tello & Jorge Juarez
Foreign exchange is made up of remittances, net exports, as well as foreign investments and portfolios. Portfolio foreign investment represents the highest impact asset in the foreign exchange flow, significantly affecting the exchange rate. From the start of the pandemic, these capitals have been exiting consistently from the country, causing the peso depreciation. Focusing on the assets, it is important to consider the interest rate of Mexico and compare it to that of other countries, having the capacity to determine where the flow of capital is headed.
The Bank of Mexico has been unable to transmit certainty, disfavoring direct and portfolio foreign investment flow. Additionally, there are no favorable prospects regarding flow of remittances, income from tourism and net exports. Regarding interest rates, Mexico finds itself in a favorable position, having a relatively low rate. The reactivation of the global economy and the stabilization of COVID cases will be the factors that present the highest influence in the value of the currency exchange rate.
(PDF Article Only Available in Spanish)
The Bank of Mexico has been unable to transmit certainty, disfavoring direct and portfolio foreign investment flow. Additionally, there are no favorable prospects regarding flow of remittances, income from tourism and net exports. Regarding interest rates, Mexico finds itself in a favorable position, having a relatively low rate. The reactivation of the global economy and the stabilization of COVID cases will be the factors that present the highest influence in the value of the currency exchange rate.
(PDF Article Only Available in Spanish)
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