The interest rate in Mexico

[longtang]

The recent COT data is showing that the commercials are extremely long on the peso.

This means that the USDMXN should go down.

I thought about entering this trade last night because the Daily 4H chart had clear negative divergence. However since I had no experience ever of trading this p I decided to just use 1 mini lot paper trade.

Lo behold the thing dropped 4500 pips over night. (it dropped 4500 pips the high of 11.5187 down to the current 11.0750). I was able to capture 3500 single lot pips that move which translates to about $320 on that mini lot.


Now since that I have no experience trading this p before I had no idea what the interest rate differential was. Yet I was intrigued to see that I gained $.26 for swap on that mini lot selling the USDMXN.

Does anyone have any experience trading the Peso? Also where does one go find out about the interst rate of this country? Apparently MXN has a higher itnerest rate than the USA! Pretty amazing!

cheerios.

thx in advance.

[TheDrifter]

Well here goes the source (Bank of Mexico):

http://www.banxico.org.mx/

Unfortunately it's all in Spanish. Still I thought it might help you. After all numbers are the universal language or so I hear.

The Mexican peso does have a rather interesting (if unstable) movement. Having lived in Mexico all my life my family I have been affected (adversely usually) by the sudden movements of the interest the USD/MXN ratio. I remember in the days of yore (about twelve years ago) when we could by a dollar with 3 pesos. Then some political stuff happened involving a combination of corruption/incompetence/interventionofthedevil the peso had an extreme devaluation. The USD/MXN simply doubled its value in a matter of months obviously had a catastrophic effect on inflation interest rates. My family actually had a somewhat large debt in dollars . Needless to say the devaluation was a swift kick in the nuts metaphorically speaking.

Somber stories of my childhood aside the peso does seem to present an attractive opportunity. Keep in mind however that if Calderon ( PAN right wing party) the elected president for 2007-2012 is largely believed to be one to keep the USD/MXN parity under relative control so you might want to be careful when going long on anything other than a short term.

For the next couple days there might be also a slight effect the political instability following the elections. The official vote counting which is 95.40% complete (as of 2 am EST) shows a difference of 0.51% between the main contenders. One of them Lopez Obrador actually threatened to make some serious noise if he doesn’t win the election (which is likely as the preliminary results showed him losing for less than 1% difference) he actually has the popular power to make some damage . It should be noted that if he wins by a twist of fate chances are that the Mexican peso will weaken in an extreme way as he is a left wing populist which the international community doesn’t trust (Think Hugo Chavez of Venezuela).

Just my two (MXN ) cents

TheDrifter