|
Peso
experiences
volatile trading in January
In January,
the peso experienced some volatility in trading.
In the first half of the month, the currency strengthened from
11.23 pesos to the US$ to 10.81 pesos to the US$ on 12
January, only to retreat again to 11.04 pesos to the US$ by the end
of the month. Rather than
following a single trading rationale, the January movement was influenced
by a variety of factors, including heavy tax payment-related buying by
companies operating in Mexico and expectations that the Central Bank would
increase the amount of US$ sold on a daily basis, which helped bolster the
peso in the first half of the month.
In the second half of the month, concerns that the U.S. Federal
Reserve is closer than anticipated to raising interest rates drove trading
activity. Sentiment for the peso
continues to dwindle, as concerns that Mexico may not be able to derive
the full benefit from the pickup in the U.S. economy are increasing,
particularly in light of increased competition from Chinese manufacturing
facilities and dim prospects for economic reforms.
As a result, the peso outlook for this year has worsened.
Consensus Forecast panellists expect the currency to weaken to
11.59 pesos per US$ by the end of the year, compared to 11.55
expected last month. The
forecast for 2005 falls just a notch short of the 12 pesos to the US$
threshold: 11.99 pesos to the US$.
Trade
balance improves notably in 2003
According to preliminary information, the trade
balance incurred a deficit of US$ 5.6 billion in 2003, slightly below
expectations and well below the 7.9 billion deficit recorded in 2002.
The improvement in the trade balance was because exports increased
at a faster pace than imports. In
fact, exports grew at twice the rate of imports, however at a low level
— +2.8% versus +1.4% — when compared to the double-digit growth levels,
which mainly characterised the external sector from the late 1980s until
2001. While the National
Statistical Institute (INEGI) has not yet published details for the last
month of 2003, information for the first eleven months of the year
indicates that exports profited from buoyant oil shipping, whereas non-oil
exports remained virtually unchanged over 2002. Imports, on the other hand, were subdued by weak capital
goods imports, which actually contracted, whereas consumer and
intermediate goods increased moderately.
Consensus Forecast panellists expect the trade deficit to widen to
US$ 8.7 billion this year, as imports are seen to grow by 6.7% amid the
anticipated pickup of domestic demand.
Exports, in contrast, will grow moderately this year at 5.3%.
The diminished export growth rate, despite the pickup of the global
economy, reflects concerns that the Mexican economy may lose further
market share against its Asian competitors, which continue to establish
themselves as the preferred manufacturing base for the global economy.
|
