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Strength of the Mexican peso in 2022


Brian Dalziel

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.  Two Latin American currencies – the Brazilian real and the Mexican peso – have outperformed G10 nations and other emerging markets in 2022 despite the sharp appreciation of the US dollar.

.  One reason for the relative strength of the real and the Mexican peso is sound central bank policies that aggressively raised domestic interest rates in anticipation of and in response to US interest rate hikes this year.

.  Higher interest rates in Brazil and Mexico have also created stronger yields for investors compared to declining yields on US Treasury bonds, contributing to the positive performance of the real and the Mexican peso – trends that are expected to continue.

Why Are The Brazilian Real And Mexican Peso Outperforming G10 Currencies?
By Oxford Business Group
Oct 20, 2022

https://bit.ly/3DhyJTH
 

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7 hours ago, Jreboll said:

Your article might prove the OP’s point. If Mexico is re-financing its debt at approx. 9% interest and U.S. Treasuries are offering approx. 4% interest, there’s going to be decent demand for Mexico’s debt vs. U.S. Treasuries, thereby keeping the MX peso strong over the next several months.

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9 hours ago, HookEmHorns said:

Seems like a good time to refinance with interest rates going to continue to increase. If they waited to 2025, imagine the rate to refinance. Refinancing now saves a lot of future interest.  2023 will ring in the full blown Recession. BTW, some US Treasury Bonds are paying 8.6 %, not 4 %.

 

 

And a full blown world war....

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The penalty for early I bond redemption is the most recent 3 mos. interest.

Consult the Treasury Direct website for current, accurate informationhttps://www.treasurydirect.gov/savings-bonds/i-bonds/

There are strategies for buying more than $10k per individual via the website (plus an add'l $5k purchased through a tax refund) which is the current annual limit.

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41 minutes ago, tomgates said:

Those are I Bonds, must hold 5 yrs or penalties. There is a $20,000 limit too.

You can buy up to $10,000 in I Bonds each calendar year through an electronic TreasuryDirect account. The minimum purchase amount is $25.

The $10,000 limit is per person, not per household. In other words, a couple can buy a total of $20,000 in I Bonds per year.

You must own the bond for at least five years to receive all of the interest that is due. You cannot cash out an I bond before holding it for a year; if you do so after that point (but before five years), you forfeit three months of interest.

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On 10/23/2022 at 10:20 AM, rckrckr said:

US Treasury I bonds 9.6% if purchased by end of the month. Rate will drop to between 6 & 7% on November 1.

Thanks to several of you I just made it under the wire for the 9.62% rate on $10,000.  Good for 6 months. Then 6.47% for the next 6 months... which ain't bad at all either.    Thanks!

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  • 2 weeks later...

The Bank of Mexico (Banxico) raised the interest rate to 10%, the highest level in its history, which represents the twelfth consecutive increase and the fourth of 75 base points before the highest levels of inflation in two decades. 

With the increase, the autonomous body argued that "monetary policy is adjusted to the trajectory required for inflation to converge to its 3% target within the forecast horizon." The inflation rate would not be close to the 3% goal until the fourth quarter of 2024, when Banxico expects it to average 3.1%, which implies one more year than expected in the decision of last August 11.

The announcement of the monetary decision, which will be reviewed again on December 15, is disclosed in the midst of criticism from the Mexican president, Andrés Manuel López Obrador, towards the central banks for the rise in rates.

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The forecast is a 50 basis point increase in the next meeting 12/15. The last 4 increases were 75bp each.

CETES have been steadily increasing but the rate of change is slowing. The 1 year CETE is only offered every 2 weeks now. The last rate was 10.87%.

I was hoping the MXN/USD rate would return to 20:1+ but it's been steadily sliding toward 19 for a while. 

image.png.ee235ff9a739204bf89ea16d2e38a131.png

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