“The central bank will hold its first $1 billion auction of non-deliverable forward contracts on Monday, offering a way for businesses with expenses in dollars but revenue in local currency to hedge against further declines in the peso. Fitch Ratings has said companies including America Movil SAB and TV Azteca SAB are among the most vulnerable to a weaker peso as their overseas debt gets more expensive in local-currency terms,” reports Isabella Cota for Bloomberg.
Investors who believe the Mexican peso may continue to depreciate but anticipate the markets will improve can look to currency-hedged ETF strategies to diminish the currency risks. For instance, the Deutsche X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX) and the recently launched iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW) provide exposure to the Mexico’s market without the added currency risk of a depreciating peso currency.
The peso is an important part of the Mexico investment thesis because exports account for over a third of GDP in Latin America’s second-largest economy. So are oil prices because Mexico is one of the largest non-OPEC producers in Latin America.
The peso is “trading near the average price of the past 200 days — a technical indicator that, when breached, may indicate more gains. Trading volume is lower than average ahead of the auction, according to traders,” reports Bloomberg.
For more information on the Mexican markets, visit our Mexico category.