Dollar Welcomes Mexico Peso

By Ye Xie, Justina Lee and Andrea Wong

The diverging global economy means the U.S. dollar will drag Mexico’s peso and Russia’s ruble along with it to the biggest gains among major currencies this year, while New Zealand’s dollar and Argentina’s peso will turn into the biggest losers.
That’s the conclusion of economists, strategists and investors surveyed by Bloomberg. They see Mexico’s exchange rate gaining 11 percent by the end of 2015, with the U.S. Dollar Index rising about 3 percent and the ruble climbing 22 percent. Argentina’s peso is forecast to weaken 29 percent as New Zealand’s dollar drops about 5 percent. Even the euro, which today slipped below $1.20 for the first time since 2010, is seen falling another 1 percent.
With the U.S. economy forecast to grow at the fastest pace in a decade, Mexico’s exports to its northern neighbor and largest trade partner may benefit. That’s in contrast to the euro region and Japan, where stagnant growth and the threat of deflation dominate. In New Zealand, policy makers have stopped raising interest rates as inflation falls, sending the currency to a 2 1/2-year low last month.
Investors should be “very much focusing on divergences that we are going to have around the world,” Scott Mather, the co-chief investment officer at Pacific Investment Management Co., which oversees $1.9 trillion, said in a Dec. 19 interview with Bloomberg Television. “Dollar strength is going to be a theme well into next year and maybe even longer.”
Spilling Over
Faster growth in the U.S. is spilling over to Mexico, offsetting the drag from lower oil prices. The Latin American economy is forecast to expand 3.4 percent this year, compared with an estimated 2.2 percent in 2014 and almost double the region’s average projected growth rate.
The peso will climb to 13.48 per dollar by year-end, according to the median forecast of 40 strategists, after falling 12 percent in 2014 and touching a five-year low of 14.9842 today.
“Improvement in growth will place appreciation pressure on the peso,” Alejandro Urbina, a money manager at Silva Capital Management LLC, said by phone from Chicago on Jan. 2. “There are expectations for capital inflows” as the government opens up the energy sector to foreign investors, he said.
Other winners may be the currencies of commodity producers, which were hit by the 50 percent decline in oil prices since June. Brent crude prices may recover to $76 a barrel, from a 5 1/2-year low of $52.66 today, according to a survey.
Source: Bloomberg

One comment

  1. If wishes were fishes, we would all eat them all. The same would be said for pesos, for we would all have them . In todays New York Times newspaper business section, the Mexican peso was 15.6205 to the dollar. The Mexican Peso has not gone up in value to the U.S. dollar since my family first went to Mexico some 40 years ago. It was 400 pesos to the U.S. dollar then, and this number increased each year we returned to Mexico until the Government devalued the old peso to the new peso that had an exchange rate of one new peso to ten old pesos.

    From then until now, the peso has gone up in the number of pesos per dollar most every year we have vacationed in Puerto Vallarta. And so has the amount paid for our timeshare maintenance fee. Last September we received 10.9 or so pesos for each dollar …. what will it become this September?

    The value of a countries money is a function of the productivity and its increased output. A recent University study of the productivity of workers of each country, which tested math ability, critical thinking ability, the ability to follow instructions, skills and education, placed Japan and South Korea at the top, and Spain at the bottom. The United States and Mexico were somewhere in between .

    It reflects what the schools are teaching the students for achieving a good life. When they tested the new millennium 21st Century workers (2000 – 2015), and then compared them to the prior 20 Century millennium workers … they were worse, and that continued with each prior Century millennium workers.

    The problem is with the schools and teachers , for schools no longer teach that which is required by society to excel in their achievements. To teach that everyone is the same and deserves to be equal regardless of ability and effort, or to avoid out competing another because it will make them feel bad, or being none aggressive or not bullying, is good … is bad , and in societies that teach this , are poor performing countries.

    Consequently, America is a failing society and country, and its workers are becoming increasingly unemployed, and are being replaced with workers from other countries that have taught their students the importance of hard work and the importance of learning. The U.S. and Spain may be bad examples for the Mexican workers. I will see when I return to Puerto Vallarta in September if the dollar welcomes Mexico’s peso.

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