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News Article

Peso Rises Against Dollar as US Locks Horns with China

By Peter Appleby | Fri, 07/24/2020 - 10:56

The Mexican peso gained 0.26 percent against Thursday’s benchmark to hit MX$22.43 per dollar on Friday, reports Reuters. This rise broke two weeks of gradual losses for the peso and comes despite more dire warnings on Mexico’s economy. On Monday, Citibanamex, one of the country’s foremost banks, reforecast its original 9.2 percent GDP contraction for 2020 to a contraction of 9.6 percent, Expansión reports.

The growing political conflict between the US and China is the main reason for the peso’s improved form. The US, earlier this week, closed China’s Houston consulate to “protect American intellectual property and America’s private information” according to the State Department, after two Chinese nationals were charged with “hacking governments, dissidents, human rights activists and private companies, including those engaged in COVID-19 vaccine research,” reports CNN. China today responded in kind, ordering the closure of the US consulate in Chengdu, Sichuan province.

Adding to the concern on the dollar is the ever-increasing number of COVID-19 cases in the US. As of July 23, the US registered more than 4 million positive cases and over 142,000 deaths, according to reports by the Center for Disease Control and Prevention. The state of California this week overtook New York– the state with by far the most COVID-19 deaths – in positive cases, despite California’s measures which included a state-wide mask mandate in June.

Though experts are predicting a harsh contraction of Mexico’s economy this year and a small recovery the next, Director General of Banorte Marcos Ramírez Miguel has said Mexico is now “past the worst.” “I think the worst is over. We do not know exactly how long it will last - we are all waiting for the vaccines to arrive - but what is certain is that we have already learned to live with it (COVID-19) and we are getting better and better and, eventually we see a light at the end of the tunnel,” said Ramírez, speaking ahead of the publication of the bank’s 2Q20 report.

Peter Appleby Peter Appleby Journalist and Industry Analyst