Forex Investment and Currency Trading

Mexico: Uncertainty for the MXN outlook continues to weigh on investor sentiment. Deputy Finance Minister Werner commented that the MXN market has become “fertile ground for speculative activities” echoing comments made by Banxico Governor Ortiz earlier this week. Banxico did not intervene in FX markets yesterday (note the central bank issues a brief statement after market close
confirming FX intervention), but markets appear concerned as every move down in USD-MXN prompts discussion of possible central bank action. Some remain skeptical of the central bank’s ability to halt the MXN slide and express that view via a long BRL-MXN recommendation. The daily USD auction has a minimum bid of 14.8219 today. Another key level to watch will be 14.71 as this is where Banxico began its discretionary intervention last week.

Local rates bear steepened with the 10y TIIE getting paid at 8.77% before tightening up slightly later in the day. Reduced investor demand for long end exposure was evident at yesterday’s auctions. Market expects investor sentiment to continue to deteriorate as the Mexican economy feels the brunt of the US slowdown.