A late spurt of Peso selling in thin markets after last night's close pushed USD/MXN higher last night, with the pair touching a high of 10.8785 around 6.00 PM last night. Traders speculate that it was "fund" related, although they are a bit mystified why a "sophisticated investor" would enter the markets with almost no liquidity, other than with the purpose of moving the market. Late yesterday afternoon disappointing MXN retail sales figures were released, which revealed y-on-y growth of 2.9%, quite a bit lower than the 3.2% median estimate from local economists.
Some traders attributed the late Peso sell off to this as a harbinger for lower growth in general, as strategists and economists have been waiting for the deceleration in the US economy to show up in MXN data. USD/MXN has remained well bid over night, and the pair opened NY trading at 10.8675 - up roughly 50pts from last night's NY close. The front contract on the BM&F opened this morning at 2.1455, up slightly from its 2.1440 close last night.
There was a slight negative tone to the market on the open after President Lula got shellacked in the televised presidential debate last night over the "dossier scandal", however traders are ambivalent as they feel that Lula is still likely to win, and if he didn't Alckmin would be a pro-growth, pro-business president - so its a win-win. Local commercial dollar sales have knocked the contract back down to 2.1430 (2.1400 spot equivalent).
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