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Peso on the Move ... Where's It Headed ?

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Forecasts are fun.

How did this set of expert predictions (posted 10 days ago) work out?

We're 6 days into October,  and the MXN Peso is officially at 18.53.


=====================================================

Peso to Dollar Forecast

Mexican Peso to US Dollar Exchange Rates Forecast Values

Mexico New Peso per One U.S. Dollar. Average of Month.

Month Date Forecast Value Avg Error
0 Aug 2017  17.797 ±0.00
1 Sep 2017  17.76 ±0.22
2 Oct 2017  17.98 ±0.30
3 Nov 2017  18.29 ±0.35
4 Dec 2017  18.66 ±0.40
5 Jan 2018  20.09 ±0.44
6 Feb 2018  19.26 ±0.48

==================================================

The expert predicted no higher than 18.28 ... but we've zoomed past that 'expert' mark  and are now at a 3% weaker MXN peso than the expert prediction ... approaching the expert's December value,  2 months ahead of their schedule (aka guess).

Where's it headed next ?

Why?

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My Mexican stock broker estimated that the pesos would slowly loose value with the dollar much like the forecast shown above.

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Well when the peso broke 22 to the US dollar, my broker said buy, buy, buy. Being greedy I waited too long and missed the great opportunity. Those I have talked with or read about who supposedly are experts on the topic have in general been right much more often than being wrong.

But they are the first to say that they are only making educated projections which are not always correct.

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37 minutes ago, johanson said:

Well when the peso broke 22 to the US dollar, my broker said buy, buy, buy. Being greedy I waited too long and missed the great opportunity. Those I have talked with or read about who supposedly are experts on the topic have in general been right much more often than being wrong.

But they are the first to say that they are only making educated projections which are not always correct.



Hey Pete,
When could you buy MXN pesos for $22 ?

The official market   Buy    prices for buying MXN pesos never got above $21.65   and   even the Peso's mid-market values peso never got above $21.96.

Plus, the peso mid-market prices only touched the $21.96 peak briefly for half a day back on January 19.

Odd??

Does your broker have some 'bajo del mesa' unofficial source of pesos?


http://www.xe.com/currencycharts/?from=USD&to=MXN&view=1Y

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Well the charts I looked at, and I don't remember which ones I looked at showed over 22 quite a few days at the beginning of the year.

I believed that I could and the charts I looked at said I could too. But I can not argue with the web page you referenced.

I just looked for other charts that would support my 22 to 1 statement. And so far they agree with what you posted.

Yet somehow, this old and warn out brain tells me that it was slightly above 22 to 1.

I shall go to Actinver Monday and figure out where my error was.

Thanks for correcting me.

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To days historic data, for 1 year,  $ vis MXN from XE currency exchange web page, note max high 21.95646. 

Damn close to 22 Pete, but no banana. Lunch on Pete, met at Salvador's on Monday

7 Oct 2016 00:00 UTC - 7 Oct 2017 03:53 UTC

Today's USD/MXN close:18.55322......... One year spread ;low:17.49672high:21.95646

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12 hours ago, johanson said:

Well the charts I looked at, and I don't remember which ones I looked at showed over 22 quite a few days at the beginning of the year.

I believed that I could and the charts I looked at said I could too. But I can not argue with the web page you referenced.

I just looked for other charts that would support my 22 to 1 statement. And so far they agree with what you posted.

Yet somehow, this old and warn out brain tells me that it was slightly above 22 to 1.

I shall go to Actinver Monday and figure out where my error was.

Thanks for correcting me.


The $22 to 1 was  (and is)   a popular myth among many expats ... Cocktail chatter & coffee-klatch fodder.

The real-world  $$ prices to   buy   MXN pesos only touched a one-time maximum of $21.65 for part of 1 day  ...    meaning that you'd have to be a  genius  market-timer  to get even $21.50.

The real-world   buying  price for pesos was at~over $21.35  for only 3 days .... which meant   we only had a brief    1 week window   to buy  MXN pesos at even $21 pesos per USD.

Coffee & cocktail chatter are fun,   but  ... Should we invest our hard-earned savings based on popular gossip ?
;)

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Has the "Table of Knowledge" at Salvador's ever been wrong?   To quote some dialogue in Casablanca, "I'm shocked, shocked...." 

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Currency moves have always been easy to predict....actually no.....stocks on the other hand....easy to predict....okay so they are not either. That is why my wife and I invest in ant races and have never lost as the ants refuse to wear numbers and they all look alike.

Fred Habacht

 

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14 hours ago, johanson said:

Well when the peso broke 22 to the US dollar, my broker said buy, buy, buy. Being greedy I waited too long and missed the great opportunity. Those I have talked with or read about who supposedly are experts on the topic have in general been right much more often than being wrong.

But they are the first to say that they are only making educated projections which are not always correct.

Here is the chart.... I learned in life as a day trader that I never hAd the expertise to trade the forex nor bet on baseball games. The choice that you made came from a gut feeling and you did was appropriate at the time. AND i CONSIDER IT TO HAVE BEEN THE RIGHT CHOICE. 

http://www.macrotrends.net/2559/us-dollar-mexican-peso-exchange-rate-historical-chart

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4 hours ago, michael2595 said:

Here is the chart.... I learned in life as a day trader that I never hAd the expertise to trade the forex nor bet on baseball games. The choice that you made came from a gut feeling and you did was appropriate at the time. AND i CONSIDER IT TO HAVE BEEN THE RIGHT CHOICE. 

http://www.macrotrends.net/2559/us-dollar-mexican-peso-exchange-rate-historical-chart

.
Interesting plot.   I didn't realize that Forex used XE.com's currency mid-maket trading data - but it makes sense because XE.com handles so much of the USD-MXN exchanges.  (e.g. Panda does zero trades in MXN pesos - but they still quote pseudo-rates ... and Mexico's national bank rates are from the day before - not current.)

Another way of saying all this:   The Forex "plot" is an  exact copy  of XE.com's plot & XE.com data  that I showed above.

... I had imagined that the Forex platforms used their own data ... but, since XE is the IRS's & US Treasury's source of data,   it makes sense the Forex would use XE.

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So ... The MXN peso has weakened much faster & much more ... and 2 months sooner than some 'experts' predicted ...
Will it continue to weaken ?

History shows that confidence in MXN pesos is often the tail of a very big American dog.   ... The MXN peso gets wagged around due to no fault of it's own, and is a reflection of problems (or strength) in the USA. ...   

Since no one has said it:   Confidence in USA & the US dollar & Government have been steadily falling ... as the USD has fallen 13% vs the Euro, Pound Sterling, and even the Loonie.

Notice that the Germans are selling their 10 year bonds at a NEGATIVE 0.25%  (yes, a bondholder has to pay ~  gets less $$ at the end of 10 years) ... while the USA 10Yr bond yields have been doing the opposite ... losing value ~ sliding dramatically ...   due to worldwide recent loss of confidence in the US economy~ and huge losses of confidence in the US Govt. .... Proof? ... Notice how US 10 yr bonds have fallen ~slid~ a full 17% over just the last 6 weeks.

This means that US taxpayers must now pay out an extra 17% higher interest to finance their $20 Trillion rapidly growing debt ... having to pay 2.37% out to creditors,  while the Germans actually collect 0.25% in gains on selling their government debt.

In the world where the MXN peso gets bashed for US economic~govt. problems ... the latest round of deep confidence losses in USA fiscal future appear to be making traders especially nervous & negative about MXN peso values ... because the USA & Mexico's economies are so intertwined ... The fiscal data say that the USA's problems are dragging down confidence in Mexico's economy. ... *sigh*  :(

The next few months of US Treasury rates (up or down) may be the best indicator of what fickle currency traders pay for MXN pesos.

Check out the last 6 weeks of US 10 yr Treasury bond yields. (click on link below to see how nervous big money$$ is about the USA ) ... :(

The latest 6 week slide in MXN peso values mirrors the USA's slide in US 10 year T-bill rate$ ... even though NY-Mex Crude Oil values have been rising during the same period.


??
http://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

 

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You missed the biggie.  T bill rates are up because the Fed has been raising rates and signaling more increases on the way.  In a rising interest rate situation, the capital value of fixed rate bonds issued before the interest rates went up are going to fall.

This constant drum beat of big-time corruption and tax money theft by the political class here sure hasn't helped things.  Mexico is actually continuing to fall in rankings of national corruption.

Interestingly remittances are up, over $29 billion per year annual rate now.  However I would expect drug sales are down due to all that legal pot up there these days.  Tourism remains very strong, when compared to most other places in the world, Mexico is a screaming bargain for the U.S. tourist.

I confess I don't understand why the peso is actually dropping in relationship to the declining dollar.  I would have expected it to rise or at least stay the same.  Maybe the trade issues are having more of an impact as well.

Another factor may be the publicity being given to the upcoming presidential race, with polls showing socialist Morena well in the lead and the constant barrage of big time corruption stories about mainly PRI politicians.  Currency traders don't like political uncertainty.

And the screaming headlines about crime and natural disasters can't be helping.

 

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With the MXN Peso breaking $19.   we've reached a point that the "experts" did not predict until next year, 2018.

In another very big bet on a forward-look,  the Mexican Government just made the biggest bet ever for 2018,  as


"The World's Largest Oil Hedge Is Complete"

locking in   330 million of barrels   of 2018 Mexican oil at $46 a barrel,  guaranteeing a stable level of $15 billion in US dollar** revenues for the Mexican Gob's 2018 budget.

**Notice that since the hedge contracts were negotiated in US Dollars  (just like in the past) ... even if the Mexican Peso falls ... the Mexican Gob. still collects it's oil revenues in US dollars,     which softens the blows when the MXN peso weakens vs the US Dollar.

Historical Context:   the Mexican Gob. has made some really shrewd oil hedging contracts in the past
,  as they locked-in $76 a barrel oil when the price fell to $50 a barrel (saddling 7 big banks, NY + Deutsche Bank + Barclays with huge losses) ... and then Mexico locked in the next round of hedging contracts at $48, as the price then fell down to $20 a bbl (again saddling big Wall Street banks with huge losses).

Which way will things go this time ?


https://www.bloomberg.com/news/articles/2017-10-16/mexico-says-world-s-largest-oil-hedge-has-been-completed

and https://www.bloomberg.com/news/features/2017-04-04/uncovering-the-secret-history-of-wall-street-s-largest-oil-trade

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On 10/7/2017 at 5:53 PM, Mainecoons said:

Currency traders don't like political uncertainty.

Terrific information and well above my pay grade, I'm sorry to say. Fascinating stuff. I'm a politics junkie, and lean left. I worry about oligarchy more than I do nihilism. I'm worried about the enormous divide between both sides, and compromise in the US doesn't appear to possible in any sort of near-future. We seem to be in a severe downward spiral. Some have been to wonder if this is a return to 1860 and this time the US lets them go. This must be what political uncertainty looks like. How bad can it get for the US, which is bad for the world?

The stock market appears to be divorced from real life. There doesn't seem to a lot of worry among stock traders. After 2009, who can blame them? They have been immunized from disaster. But I doubt currency traders will get the same break if they ever get it wrong. Is it possible at some point that another currency becomes the world-wide default currency?

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Currency traders follow the news.  That has not been reassuring for Mexico lately.  Rampant crime, an avowed socialist leading in the presidential polls, the depressed price of oil, rampant corruption with Mexico now ranked the most corrupt in Latin America and the NAFTA talks not going well with both Canada and the U.S. insisting on an end to the paying of starvation wages in Mexico's export industry.  And inflation in Mexico up to over 6 percent annually.

All of that probably plays a part.  

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2 hours ago, crynoutloud said:

I think it was last spring when the Mexican Government said they were stepping in to halt the slide of the Peso with some type of financial arbitrage. It was probably temporary.

That's been going on for years but it's not arbitrage.  Anytime the Peso drops too quickly for their liking they spend reserve US Dollars and buy Pesos which slows the slide.

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20 hours ago, El Saltos said:

That's been going on for years but it's not arbitrage.  Anytime the Peso drops too quickly for their liking they spend reserve US Dollars and buy Pesos which slows the slide.

Sorry I used wrong word off top of my head. They started using derivatives because they do not have enough dollar reserves to defend the peso.

Feb 21, 2017 - MEXICO CITY (Reuters) - Mexico’s top finance policymakers said on Tuesday the central bank will offer up to $20 billion (16.00 billion pounds) in currency hedges, a major shift in policy aimed at helping Latin America’s No. 2 economy tame volatility that has battered the peso

STARTED IN MARCH WITH A BILLION

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17 hours ago, El Saltos said:

The quote says "currency hedges" not derivitives.  Mexico has lot so $USD, that's why they were able to purchase $20B US in hedges!

Peso Surges As Bank Of Mexico Announces FX Hedge Program

Feb 21, 2017 5:46 pm -06:00
by  John Kicklighter, Chief Currency Strategist and Christian Lewis
 
 
 
 
 
 
 

Talking Points:

  • Peso climbed as much as 2.3% against the US Dollar after Mexico announces FX hedge program
  • FX commission has stated up to $20 billion for program, first auction March 6 for up to $1 billion
  • Hedges using derivatives set to reinforce peso without taping limited international reserves

See how retail traders are positioning in the majors using the DailyFX SSI readings on the sentiment page.

The Mexican Peso surged as much as 2.3 percent against the US Dollar to a three-month highs after the Bank of Mexico announced its plans for a ‘FX hedge’ program. According to Mexico’s Foreign Exchange Commission, the central bank is prepared to offer as much as $20 billion in foreign-exchange hedges, with the first auction set to take place on March 6 for up to $1 billion. Officials stated that the program is being brought in response to the high volatility around the USD/MXN exchange rate which they say does not reflect the fundamentals of the country.

Since the election of U.S. President Donald Trump, his vows on the campaign trail to renegotiate the existing free trade deal with Mexico and act with more aggressive programs, led the peso to plunge a further 20 percent to record lows against the US Dollar through the end of the year. As stated on the Bank of Mexico website, this intervention will make it possible for Mexico to hedge against FX risks, without using international reserves.

Over the past year, Banxico has attempted to stem the tide against its currency with rate hikes and direct intervention efforts to relatively limited effect. While the Mexican policy efforts are direct, the scale of the United States influence has proven difficult to cope with. There are still open threats of trade renegotiation, import taxes and the building of a physical wall between the US and Mexico (for which the former’s leader has stated the latter country will pay). The pressures are unlikely to dissipate for this exchange rate anytime soon.

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