BajaNomad - What's up with the Peso Exchange Rate?

What's up with the Peso Exchange Rate?

MitchMan - 7-11-2012 at 05:36 PM

I have been tracking the peso to the USD (USD/MXN) for some time. As long as I have noticed, the value of the USD goes upward against the peso whenever the value of the USD goes upward against the Euro. Always has tracked that way fairly faithfully. But, now the Euro vs the dollar (EUR/USD) is at 1.2234 (strong USD vs the Euro) but the USD/MXN is holding at about 13.33 instead of going up past 14.0. Very strange and big departure from recent history.

Anybody have any insight into this? Barry, Wessongroup?

[Edited on 7-12-2012 by MitchMan]

Mula - 7-11-2012 at 05:40 PM

David E?????

thebajarunner - 7-11-2012 at 07:21 PM

The Euro has its own problems....
Yes, it has been a reliable benchmark, til the meltdown in Greece, Espana, Italia and other similar disasters.

Gold

Howard - 7-11-2012 at 07:56 PM

Follow the recent ups and downs of gold and you might have your answer.

CortezBlue - 7-11-2012 at 08:08 PM

Silver

Marc - 7-11-2012 at 09:54 PM

Life was so much simpler at ten to one.

htnfool - 7-12-2012 at 05:45 AM

Life was so much simpler at ten to one.

But it is so much better at 13 to one!!!!! :biggrin:

mtgoat666 - 7-12-2012 at 05:49 AM

Quote:

Originally posted by MitchMan
I have been tracking the peso to the USD (USD/MXN) for some time. As long as I have noticed, the value of the USD goes upward against the peso whenever the value of the USD goes upward against the Euro. Always has tracked that way fairly faithfully. But, now the Euro vs the dollar (EUR/USD) is at 1.2234 (strong USD vs the Euro) but the USD/MXN is holding at about 13.33 instead of going up past 14.0. Very strange and big departure from recent history.

Anybody have any insight into this? Barry, Wessongroup?

[Edited on 7-12-2012 by MitchMan]

have you heard about the financial problems in european union? relative to european union, everything in US and mexico is a-OK. there is your answer!

I think I already said that

thebajarunner - 7-12-2012 at 08:02 AM

Quote:

Originally posted by mtgoat666

Quote:

have you heard about the financial problems in european union? relative to european union, everything in US and mexico is a-OK. there is your answer!

See my post above....
Europe is in free fall
Linking the peso to Euro is irrelevant at this point.
And, as to the "gold link" post-
I do not agree, but I am hardly an expert on gold value swings, so perhaps it has some nexus.....
quien sabe??
If only Skeet were here to sort all of this out for us, and to tell us how to make a quick $40k on these currency gyrations.
:lol:

DavidE - 7-12-2012 at 09:35 AM

Let's see: You have the fed trying to shake the dollar loose from the Yuan Renminbi.

US treasury yields are at near zero but they are safer than many foreign environments.

We have trillions in drug money leaving the US then returning as "investments".

We have US citizens shipping billions into Switzerland and surrendering their citizenship.

Germany has invested trillions into revamping the eastern zone but dares not utter one word of beschweren, because even the slightest ripple would cause the Eurozone to fold up. Got news for you, Germany is NOT THAT strong financially, to keep investing in former East Germany AND devote her finances to Greece, Italy, Spain, Portugal, Ireland, et al. So the German economy must go to hell or the € becomes less valuable. Which will it be. Which one allows Merckel to get re-elected?

China is in a tizzy. The money is drying up. Sure, buildings are still going up and the politburo smiles for the cameras but the inscrutable oriental face will not longer be as inscrutable should tensions increase over the existence of Taiwan. The classic move by Beijing to divert public anger away from a souring economy. Look for it.

Iran is enriching enough uranium to generate enough energy to power Japan, or Brazil. Of course they need all that electricity to keep the revolutionary guards cool and content. Russia may posture and threaten. Russia may cut of oil and gas to Europe as a penalty but Russia will not use nuclear weapons to defend Iran or Syria. With animosity between the persians, arabs and Israeli's I feel war is a 100% certainty because somehow, someway it is going to be forced.

And US Investors? Guess what? There's no place to run. They crapped in their mess kit and nobody trusts anybody now. This is following the classic lines of the Great Depression, right to a freaking T, except unlike Hoover, Obama is trying to spend his way out of the fix. Result? This is scary. If things were healthily unhealthy, there would be extremely high inflation. There isn't. There isn't because there can't be. People would stop buying everything but life support items. Spain just put a 24% sales tax in force. Let's watch Spain go down the tubes.

The Peso? I wrote a little piece on it a while back. The support is on full force for the peso right now. The Guillermo Ortiz effect is in full song. But I have a feeling that the wrath of the PAN is going to unfold come December. It's going to be the "See! We Told You So!" effect.

Forget gold. Watch crude oil. Watch platinum (car manufacturing). Watch scrap steel prices. Copper. They are the components of economic blood.

PS: China is going to start burning the furniture sooner or later. Watch for incredible bargains on appliances, and just about everything else. The politburo fears a starving PLA a lot worse than foggy bottom fears the wrath of voters.

Mula - 7-12-2012 at 09:43 AM

Thanks, David E!

MitchMan - 7-12-2012 at 09:45 AM

Thanks for the input, guys. Very helpful. It sounds like the Mexican peso recently stopped tracking with the euro as much as it used to whereas the USD is coninuing to tract with the euro. Accordingly, if the peso is not responding to the euro as closely, then if follows that the peso is not tracking with the USD because the USD is in fact tracking with the euro decline. If A = B, and B = C, then A = C kind of thing.

The confusing chunky in the armor for me is, as Goat mentioned, if all is comparatively A-OK in both US and Mexico (compared to the financial problems in the European Union), then why is the USD responding to the declining eruo value but the peso is not so much(?)

That is to say, why is it that the peso is not tracking with the euro but the USD is?

DavidE - 7-12-2012 at 10:02 AM

MitchMan, unless you read the history of the fed under Ortíz, and get a grasp of what his strategies are, you'll never gain a foothold into how this system works, or doesn't.

Want to be rude and crude about México. People who loot during any given sexenio cannot leave their money in pesos at the risk of having them seized. Read your history especially Andres Oppenheimer's "Bordering On Chaos". So pesos have to be converted to Swiss Francs, or greenbacks or Loonies, or Pounds Sterling. It cannot be done by the supertanker load or the economy would collapse and the jig would be instantly up. A strong peso buys more foreign loot. Even the idiot Raul Salinas recognized this. So they do it over the course of the sexenio, with the harvest becoming ripe during the summer before the change. Veda de lana.

People who believe México's economy is healthy right now are the same breed that believed ol' Bernie Madoff's investment portfolio was not only believable but that anyone who didn't invest was (ewww) mentally deficient. You know "The little person who just doesn't understand".

MitchMan - 7-12-2012 at 10:07 AM

Interesting post, David E. I had heard that Mexico was in Peso supporting mode a few months ago with their reserve of USD and throwig it in onto the open currency market to try to depress the value of USD, but I thought that they exhausted that. Guess I was wrong.

Following this logic, that may mean that Mexico is affected by the euro same as always, but it is counteracting solely against the USD with its separate efforts in shoring up the peso against the USD using its (Mexico's) reserve of USD.

When it comes to international interactions of world currencies, I'm afraid I am at a great loss to explain with any authority.

David K - 7-12-2012 at 10:15 AM

Quote:

Originally posted by htnfool
Life was so much simpler at ten to one.

But it is so much better at 13 to one!!!!! :biggrin:

Right... and 4 days ago when we bought our trip pesos it was 12.905... People selling pesos for dollars had to give up 13.20 (I think it was) per dollar.

MitchMan - 7-12-2012 at 10:18 AM

Wow, these are great posts by David E, Goat, and gnukid. Great stuff! I am putting "Bordering on Chaos" on my reading list.

I am heartened by gnukid's post in that it appears to help corroborate some of what I wrote. When it comes to currencies, I never know if I am on the right track...usually I am not. Interesting to read that Mexico is determined not to let the USD/MXN hit 14.0 again. That explains a lot.

DavidE - 7-12-2012 at 10:25 AM

gnukid let's do some math:

Mexico 120,000,000 citizens, right?
Let's allow them one miserable dollar per meal to eat, three times a day
One hundred twenty million times three. Three hundred sixty million dollars a day.

131,400,000,000

When you are in México look around you. Every last brick, every last soda bottle, broom, refrigerator, towel, spoon, car, airplane, sunglasses, television, shoes, computer, paper, bulldozer, light bulb, sack of ammonia nitrate for corn.

Does it come from méxico? No. Can any of the hundred and thirty one billion dollars above be used to buy it? No. Does this stuff wear out, blow up, or get smashed? Yes. How much of it? All of it.

Of course Mexico is [NOT] exporting enough cheap crops to the USA of course Mexico is [NOT] exporting nearly the amount of NAFTA goods that it used to.

Do you care to run an adding machine and see how much crude oil sales can (NOT] pay for all that you see around you. Or how many package deals it takes Cancun and San Lucas to pay for it. The money for a cheap Chinese light bulb does not stay in Mexico. Or anything else I listed above.

But Bernie Madoff would say I am dead wrong. What say you?

[Edited on 7-12-2012 by DavidE]

DavidE - 7-12-2012 at 11:00 AM

The words "Honest" and "We" together make the epitome of oxymarooon.

Worry not about Méxicanos and trust amigo. Worry about Americanos and trust. Mexicans fall back upon family to sustain them during hard times. When there is little to eat. But that is about to change. Harvard Educated Bernie Madoff clones are in charge in México now. Taxes. They are going to tax those that have nothing. But what is going to happen to the youth in America? You know the ones that demand BMW's eight hundred dollar tablets, four hundred dollar clothes, and two hundred an oz white widow?

People quip SILVER! LAND! XYZ MIRACLE INVESTMENTS! 13% RETURN! FORGET THE FED!

I say quietly, try responsible pharmaceutical companies like Merck.

But beware of Bernie Madoff Companies like GLAXO SMITH KLINE. You know, they were the folks that threatened to cut off drug sales to Mexico unless "Something was done to stop Americans from going there and buying cheap drugs". The company that laughed when Merck voluntarily pulled VIOXX off the market because of issues with studies of cardiac events. But GLAXO SMITH KLINE keeps right on selling CELEBREX even though it is virtually a twin drug. You know GLAXO SMITH KLINE don't you, the feds just fined them BILLIONS for fraud. And now they are going after the company for BRIBERY. I check every medication carefully. If it is Glaxo Smith Kline, it does not cross my threshold.

DavidE - 7-14-2012 at 08:23 AM

KEEP ARGUING OVER CLIMATE CHANGE AND DON"T THINK ABOUT IMPORTING WATER FROM CANADA. HELLO (!) SIX DOLLAR BREAD AND TWO DOLLAR TOMATOES!

Oooooo, some commodities traders are going to get rich over the cut & paste below.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

But since then, scorching heat and a paucity of rain across the US has withered the country’s corn and soyabean crops, with the US Department of Agriculture this week making the largest downward revision to its estimate for a corn crop in a quarter of a century.

The US is crucial to supplying the world with food: the country is the largest exporter of corn, soyabeans and wheat, accounting for one in every three tonnes of the staple grains traded on the global market.

Prices for this year’s corn crop, deliverable in December, have jumped 44 per cent in a month, wheat has rallied 45 per cent, and soyabeans 17 per cent.