The exchange rate shot up yesterday to 18 pesos per dollar in the last hours of the exchange market session. The variation, after a day in which the price had remained stable, was caused by the announcement by congressmen of the majority political force in the sense that they will prepare the ground for the new Congress – which resulted from last Sunday’s election , with a qualified majority of Morena and allies – approve in September a package of 18 constitutional and legal reforms, including one to the Judiciary.
On February 5, President Andrés Manuel López Obrador presented a package of constitutional reforms, which involve the Judiciary, the electoral authority and the autonomous bodies. The absolute majority achieved by the ruling party from Sunday’s vote – according to preliminary data – opens the door to making these changes concrete, which has provoked the reaction of national and foreign financial market operators who trade Mexican securities.
“What is commonly known as the complete car (that is, the same party in the Executive and Legislative) traditionally generates a risk aversion in the markets, since it generates an expectation that the counterweights will be diluted, and it seems that, on this occasion, the main fear is that the proposals of Morena are approved without exceptions, in particular the plan C”, as the reform package is identified, Intercam explained.
The Mexican currency operated stable in the first hours of the session this Thursday, awaiting the employment data in the United States for May this Friday, and in view of the monetary policy meeting of the Federal Reserve (Fed) next week. But after 1:00 p.m., Mexico City time, it shot up to levels close to 17.97 per dollar.
The return of the high volatility of the exchange rate occurred minutes after the statements of Ignacio Mier, coordinator of Morena in the Chamber of Deputies, who announced that in September, with the new conformation of Congress, they would vote on the reforms proposed by the current Executive.
2.03 percent decline
Minutes after these statements, the peso approached 18 per dollar. According to data from the Bank of Mexico, the exchange rate closed at 17.8881 pesos per dollar spot in the wholesale market, which represented a loss of 2.03 percent, equivalent to 35.52 cents against the US currency, which made it the most depreciated currency of the day on a global scale.
In international operations, the peso was quoted at times between 17.90 and 18.02 per dollar, since according to analysts, these reforms would weaken Mexico’s institutional framework, undermining counterweights.
The reaction of the exchange rate was immediate, which means that investors will demand higher returns for the country’s productive investments.
stated Intercam’s analysis management.
For its part, the Mexican Stock Exchange (BMV), which had completely recovered what it lost on Monday (-6.11 percent, to 51,807 points), ended up deflating in the final stretch of the day.
The CPI reached 55,730.31 units, but ended with an increase of only 0.12 percent, to 54,477.25 points.
The exchange rate in Mexico and the BMV have maintained high volatility, after the presidential elections last Sunday, and will continue to fluctuate until the composition of Congress is defined this weekend and until the next Legislature begins, the first of September.
However, the international factor matters among investors, the 5.5 percentage point differential between the rates of Mexico and the United States maintains a certain anchor in the exchange rate.