Weak figures US economy affect Mexican Peso

Weak figures US economy affect Mexican Peso

07-04-2009 14:20

The US Dollar went up against the 6 most-traded currencies, due to gloomy reports from the UK and US, which stimulated the demand for the safe-haven Dollar. The Mexican Peso, strongly influenced by the US economy, fell for the first time in three weeks on the back of rising US jobless numbers, which led to more concerns with relation to the strength of the US slump.

More-than-expected job cuts

Currencies associated with emerging markets, like the South Korean Won, and currencies linked with commodities, such as the Aussie, lost considerably versus the US Dollar, as a report signaled more job losses than estimated. The report also fueled risk aversion, on which traders directly sold their more-profitable investments in order to obtain investments valued in US Dollar; a more trustworthy investment in unstable times. The Japanese Yen, considered as a refuge currency in times of uncertainty, also dropped versus the Greenback at the end of this week on the back of rumors that the nation could apply 10% of its public pension-reserve funds, in order to obtain high return investments, on which the demand for the safe-haven currency declined.

Undetermined amount of time

The US employment fell short of improving which led to a rather predictable movement in the markets, according to currency strategists. Pessimistic figures, such as the US jobless data, added to the already considerable concerns that the worldwide recession could continue for an indefinitely period. Indications of more US job losses fueled risk aversion to significant levels among traders, which were buying high return yields in large numbers, speculating on a swift worldwide improvement.

First negative performance

The Mexican Peso declined 0.3% versus the Greenback; the first drop in three weeks. It proves that the weak US employment data reduced demand for the Mexican currency, despite the minor decrease of only 0.3%. Fears rise that the US economy, Mexico’s major export partner, will need an indefinitely period to improve significantly.