Mexican Peso Pulls Back After Two-Week Rally
During the session, the dollar traded in a range between a high of 18.3794 pesos and a low of 18.2400.
Quick overview
- The Mexican peso weakened against the dollar, closing at 18.3686 pesos per dollar after reaching a two-week high earlier.
- The decline was influenced by a partial U.S. government shutdown and disappointing U.S. jobs data, which showed a loss of 32,000 private-sector jobs in September.
- Traders are anticipating a resolution to the government shutdown before the upcoming nonfarm payrolls report, which could impact market sentiment.
- If the shutdown continues, it may lead to increased risk aversion and potential capital outflows from emerging markets, further affecting the peso.
The Mexican peso edged lower against the dollar in midweek trading, giving back some ground after briefly touching its strongest level in two weeks, supported earlier by broad dollar weakness.
The spot exchange rate closed at 18.3686 pesos per dollar, compared with Tuesday’s official close of 18.3147, according to Bank of Mexico data. That marked a loss of 5.39 centavos, or 0.29%, for the peso.
During the session, the dollar traded in a range between a high of 18.3794 pesos and a low of 18.2400. The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, slipped 0.06% to 97.76.
U.S. Government Shutdown
The dollar weakened as a partial U.S. government shutdown began at midnight Wednesday, with many federal activities—including statistics offices—suspended while Democrats and Republicans remain at odds over government spending. Traders expect a deal before Friday, when the closely watched nonfarm payrolls report is scheduled for release.
If the shutdown drags on, risk aversion could rise, potentially sparking capital outflows from emerging markets and weighing further on the peso.
Weak U.S. Jobs Data
Private payroll processor ADP reported a decline of 32,000 U.S. private-sector jobs in September, defying expectations for a 45,000 increase, according to a Dow Jones survey.
The disappointing data initially pushed the peso to its strongest level of the day at 18.24 per dollar, before rebounding to 18.38. Trading volume was heaviest around 18.34.
With weak labor market signals and the government shutdown in focus, markets are now looking to Friday’s official payrolls release for further clarity on the Federal Reserve’s rate-cut outlook.
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