Peso loses seven places in the most used currency list; specialists blame high rates

The Mexican peso fell 7 places in the ranking of the most used currencies in the world for international transactions, being located in April of this year in the position number 15 from the place 8 in 2013, reveal indicators of the Bank for International Settlements (BIS) .

83 percent of operations with Mexican pesos are carried out abroad

The use of the country's currency for exchange in dollars went from 128 billion dollars a day in 2013, when it represented 2.4% of global transactions to 90 billion dollars in 2016, to increase again to 105 billion daily average in April 2019, representing 1.6% of global exchanges.

THE FACTS

Gabriel Casillas, chief economist at Banorte, and James Salazar, deputy director of analysis at CI Banco, explained that the preference for the Mexican currency decreased due to the rise in the interest rate of the Bank of Mexico, which made it more expensive for foreign investors to take hedges or speculate with the peso, but also because of the rate hikes in the United States that led many investors to prefer investments in US bonds.

Casillas said that, on the weight side, the comparison of fair operating volumes is at different times from the central bank's reference rate.

“In 2016, the benchmark rate of the Bank of Mexico was less than 300 basis points from what it is now and that made it a currency that markets used to express speculative positions in the face of risk events, for example, Brexit. Today, the reference rate of the central institute is one of the highest in the emerging world, so no one uses the weight to implement these positions, ”he emphasized.

Salazar said that some fear of depreciation of the peso also discouraged the use of the country's currency, due to uncertainty about Trump's threat to leave NAFTA, in addition to internal factors that generated risks of loss of the national currency.

In its Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives Markets in 2019, the BIS details that the volume of operation in the global exchange markets increased 29% compared to the survey conducted in April 2016, reporting a daily operating volume of 6.6 billion dollars.

EMERGING

The Bank of Mexico stressed that the country remained the second most traded currency among emerging countries, behind the Chinese renminbi.

The survey data reflects that 83% of operations with Mexican pesos are carried out abroad, a percentage similar to that reflected in the latest surveys. This is explained by the fact that weight transactions occur 24 hours a day around the world, ”said the institution.

Gabriel Casillas commented that, although the peso fell some places in the ranking, "while we are in that top-20 in the operation of currency volumes, we will be fine." He added that the national currency does not lose much participation in the global currency market.

What happens is that the Norwegian krona and three Asian currencies – such as the Singapore dollar and the Korean won – slightly increase their market share between 0.2 and 30 basis points, but in particular, the one that won the most market share is the Hong Kong dollar, which managed to increase it by 180 basis points and moved from place number 13 in 2016 to place 9.

This has to do with the fact that the yuan has been incorporated into the basket of the Special Drawing Right (DEC) – the “artificial” currency of the IMF -, and the greater openness in China to have greater participation in its financial markets, which It significantly supported the operation of more, as well as other Asian currencies, particularly the Hong Kong dollar, ”Casillas said.

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