Moody’s Analytics projected in a report a significant depreciation correction in the coming months based on a model that replicates the monetary and financial conditions of the last two global crises, of 2009 and 2020.
The agency Moody’s Analytics warned this Thursday of an “imminent” depreciation of the peso of 20% against the dollar, despite the fact that the Mexican currency has been one of the most resistant to the strengthening of the United States.
“The monetary tightening underway in the United States could trigger an exchange rate correction like the one that happened during the previous cycle of rate hikes by the Federal Reserve and that began at the end of 2015. Under this condition, the depreciation of the Mexican peso It looks imminent,” he considered.
The warning comes as the peso has weathered the “super dollar” phenomenon, which this year has pushed the euro and sterling to record lows, as well as Latin American currencies such as Argentine, Chilean and Colombian pesos.
On the other hand, the Mexican peso closed at 20.12 units per US bill on the last day, an appreciation of 2% compared to the beginning of 2022, when it was quoted at 20.53, according to official data from the Bank of Mexico (Banxico).
Moody’s report acknowledged that the peso “has remained relatively stable after the initial shock generated by the pandemic in the first half of 2020.”
But he anticipated a “depreciation correction” due to the “monetary tightening by the US Central Bank. (Federal Reserve, FED, for its acronym in English)”.
“This correction could happen between the end of 2022 and throughout 2023, but it could even be delayed until 2024 depending on the speed of the monetary tightening cycle by the FED and the reaction of monetary policy in Mexico,” he projected.
Moody’s recalled that in 2009 the peso experienced a three-phase cycle: an initial depreciation caused by the beginning of the recession, followed by a revaluation of lesser magnitude and then a depreciation of similar magnitude to the initial one.
Now, the peso depreciated at the start of the pandemic and recovered in mid-2021, so a new drop is yet to come.
“Recent evidence suggests that currency history appears to be repeating itself,” the analysis noted.
Mexico Daily Post