USD/MXN Rises Above 14 on Lower Oil Prices

Mexico’s peso weakened past 14 per dollar for the first time in two years on speculation that falling oil prices will curb foreign investment as the country opens its energy industry to private drilling.

The peso dropped 0.1 percent to 14.0089 per dollar at 6:40 a.m. in Mexico City. Since June 2012, the currency has mostly traded in a range between 12 and 14.

While Mexico passed laws ending the national oil company’s monopoly on drilling, the plunge in crude prices below $70 a barrel may lead some foreigners to defer projects, according to Juan Carlos Alderete, a currency strategist at Grupo Financiero Banorte SAB in Mexico City.

“That these investments could be delayed, at the least, is important when considering the country’s balance of payments,” Alderete said.

Futures on crude oil dropped as much as 1.6 percent in London. OPEC, responsible for about 40 percent of the world’s supply, resisted calls from members including Venezuela and Iran to reduce its quota of 30 million barrels a day at a Nov. 27 meeting in Vienna.

The peso is at a technical level that may trigger options payouts or prompt some traders to exit losing trades, Mike Moran of Standard Chartered Plc said by phone from New York.

“Fourteen is not only a psychological level,” Moran said. The peso’s trajectory “will be predicated on really how oil prices continue to trade, at least in the very short term.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza