- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Laouchez: Leadership in Financial Services — Missing in Action?
- Kuntz: Finding Opportunity in Emerging Markets
- Busch: How to Trade the Euro on an Outside Reversal
- Dunkelberg: The Real Banking Crisis - They're Too Big to Manage
- Greek Exit a Worse Mistake Than Adoption of Euro
- Tamminen: Waste Not, Want Not
- Morici: The Eclipse of American Banking
- Will This Decade Be More Grim Than the 1930s?
MOST SHARED
- Public Pensions Faulted for Bets on Rosy Returns
- Greece to Leave Euro Zone on June 18: Wealth Manager
- Banks Recapitalization Is a 'Necessary Evil': Strategist
- Winemaking Lures the Wealthy, But Not With Profits
- Italy 2-Year Borrowing Costs at Peak Since December
- Euro Rallies as Greece's Pro-Bailout Parties Gain Favor
- European Firms Plan for Greek Unrest and Euro Exit
- Will the Euro Misery Give Rise to Another Soros?
- Olive Oil Price Dip Adds to European Woes
- Europe’s Stronger Powers Must Reveal Plans: Ex-BoE Official
- A New Look at the ‘New Poor’
- Six Pack: Beer Buzz of the Week
- Greek Exit Could Trigger 50% Fall in Euro Stocks: Analyst
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Big Stock Upside for Hudson City Deal: Analyst
- 5 High-Yield Stocks Ready to Boost Dividends
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Option Bulls Take Another Shot on Idenix
- European Companies Plan for Greek Unrest and Euro Exit
- Public Pensions Faulted for Bets on Rosy Returns
- Will the Euro Misery Give Rise to Another Soros?
- Greece to Leave Euro Zone on June 18: Wealth Manager
- Italy 2-Year Borrowing Costs at Peak Since December
- Euro Bond Wins Supporters, but Details Remain Vague
- German, UK Bond Yields Will Go Even Lower
- Labor Board Member Resigns Over Leak to GOP Allies
- Banks Recapitalization Is a 'Necessary Evil': Strategist
RSS FEED
CNBC Guest Blog
Text Size 
Chandler: Battered Peso Could Weaken Further in Coming Weeks
The peso generally weakened from August last year through the middle of March. In the past month and half, the US dollar has slumped almost 17 percent against the peso. However, since the end of last week, with the outbreak of swine flu, the dollar has rallied around 9 percent.
Even before the swine flu, the peso's upside momentum had faded and the dollar found support near MXN13.0. As of last Tuesday, the CFTC commitment of traders showed the net speculative positions were the longest of pesos since last September. Given the price action, one must assume that part of the peso's sell-off was a liquidation of longs.
Three-month implied volatility of the dollar-peso peaked last October near a mind-boggling 56 percent. It has since fallen to around 17 percent in the middle of April and now is near 20 percent. Before the crisis, the dollar-peso was a low volatility pair—mostly trading between 5 and 10 percent.
In addition to the human and economic costs of the outbreak of swine flu, it has also impacted the liquidity of the peso. News reports suggest that the outbreak and, more to the point, the response to the outbreak, is dramatically reducing the turn-over in peso activity in Mexico. Some estimates suggest the $15 billion-a-day turnover in Mexico has fallen by as much as a third, though bond volumes have reportedly held in better.
The drop off in liquidity is causing not only greater volatility, but also a widening of the spreads between the bids and offers.
The MXN13.56 area, which contained the dollar's pullback on Wednesday, corresponded to a retracement objective. A break now, through MXN13.70 warns a probable move toward MXN13.42. Yet, our preferred view, is for the dollar to re-establish a foot hold back above the MXN14.00, which could see MXN14.50 in the coming weeks.
______________________________________
Marc Chandler is the global head of currency strategy for Brown Brothers Harriman. He has been analyzing, writing and talking about the foreign exchange market for more than 20 years. He is a regular guest on CNBC and his essays have been published in numerous economic and business publications. He previously served as the chief currency strategist for HSBC Bank USA and Mellon Bank.
Data is a real-time snapshot *Data is delayed at least 15 minutes
