Very often U.S. amigos, who have to stretch their retiree dollars like rubber bands without stretching to the point of rupture, ask me as to how low the peso can get and how they can make the most of the momentum either buying or selling.
I must point out that the great majority of U.S. retirees are not your eccentric gringo millionaires that light up their cigars with $20 dollar bills.
On the contrary, these are people who live on a pension range of anywhere between $1,200 to $2,000 dollars, which if properly administered, can yield small amounts of money to improve the quality of life in Mexico. A few pesitos mexicanos earned in the exchange market can give you an extra luxury a pensioner would not get otherwise.
These moments to make the most out of your dollar in Mexico come and go and there is no fix on the exchange parity. That’s why those earning in dollars and spending in pesos should be on the lookout for moments of opportunity.
There are many factors pushing the exchange rate up and down, sometime creating volatile bubbles that if roped in the moment can mean these opportunities stretch your dollars further.
But to do that you too have to stay on top of the news.
For instance, a week ago Thursday the dollar was selling around 18.50 pesos. But when the news broke out that FBI director James Comey “broke” the news that the FBI was reopening the investigation on Hillary Clinton’s e-mails, the news shook the exchange market and since that day the peso devalued to the point that yesterday it was selling at 19.55 and buying at 19.21, according to Mexico’s Central Bank (Banxico).
Since most pensioners are sellers, not buyers, the profit on this might have been around 50 centavos per dollar. When multiplied, this could mean just that little extra money that can make you afford a nice outing or dinner for the upcoming weekend.
Expect the parity to zigzag between now and next Wednesday, when the peso-dollar exchange rate is expected to stabilize once the U.S. elections circus is over.
But that’s not the only factor that may affect the dollar exchange parity right now.
Besides politics, on Thursday the Organization of Petroleum Exporting Countries (OPEC), after four days of losses, was about to agree a production reduction to increase prices. Reaction was immediate and benchmark oils such as West Texas Intermediate and Brent immediately gained value by as much as .98 cents per barrel, immediately upwardly affecting the international value of the greenback.
Another factor affecting the peso-dollar exchange value in Mexico is the monthly U.S. Labor Department employment reports. In case you’re wondering how the Labor Department affects your dollar, it is because Mexico currently receives an average of $25 billion a year in remittances, and in Mexico your dollar is considered a remittance by Banxico, which reaps all the dollars and gives out pesos in exchange.
Mexicans in the United States — documented or undocumented — who send their dollars south are a big influence in the daily exchange market.
As to what to do between today and Tuesday election-day with your dollars in Mexico, the recommendation is to sell, as surely if Hillary wins, the peso will return to an 18.50 per dollar general level.
But should The Donald win, devaluation in Mexico will be bound for the moon for weeks and months to come, which will be very bad for the Mexican economy, but profitable for those who have a few dollars more.
