Mexico’s peso tumbled against the dollar on Thursday on the central bank’s plans to wind down a currency hedging program, while the index for Latin American currencies also fell and was on track for its worst monthly performance in 11 months.
Mexico’s peso dropped over 2% to a two-week low, before trimming part of the decline, after the country’s foreign exchange commission said the Bank of Mexico will gradually reduce its currency hedging program given the peso’s recent strengthening.
The currency was last down 1.6% at 16.99 per dollar. “It’s primarily a technical development and will likely have a short-term impact on the currency … I’d instead keep an eye on the economy’s fundamental picture, monetary and fiscal policy, and global reshuffling of supply chains,” said Alejo Czerwonko, CIO Emerging Markets Americas at UBS Global Wealth Management.
Czerwonko expects the peso to defend its position as one of the top Latam performers throughout 2023, adding that any correction is expected to be mild and is seen at a year-end level of 17.5 per US dollar.
Source: El Financiero