The Mexican peso dropped the most in the basket of major global currencies as speculators begin to the quench their risk appetite ahead of the Federal Open Monetary Committee (FOMC) minutes on Wednesday. The peso has been a major risk correlation trade, and if the Federal Reserve does reduce quantitative easing, the peso will continue to decline if risk assets rollover.
This fall in the Mexican peso scratched out the .4 percent gain against the dollar made last week as the Mexican Congress passed legislation to end the monopoly in Mexico’s energy sector. “Rates are wider from this morning and the peso is weakening as if investors were selling bonds and the peso, getting out of risk ahead of the Fed,” said Alejandro Urbina, money manager at Silva Capital Management LLC. Mexican debt maturing in 2042 rose four bps to 7.67 percent.
The taper speculation is also knocking down the ruble, which declined .3 percent to 38.4693 rubles per dollar. Concerns of the outcome from the FOMC is outweighing exporters buying rubles on the first day of the monthly tax period. “the ruble is down as there are some lingering concerns about the outcome of the Fed’s meeting on Wednesday,” said Dmitry Dorofeev, a strategist at BCS Financial Group.
Russian debt maturing in 2027 increased three bps to 7.95 percent.