Mexican peso to recover from Greek developments

The peso weakened around 0.5% vs. the USD on Friday under low liquidity conditions because of the US holiday. 

According to Commerzbank, Mexican peso is commonly used as a proxy for EM risk and is also used as a substitute for liquidity when other asset classes fail to provide this feature. In addition, the Mexican banking system seems healthy enough as to withstand turbulence and subject to strict local liquidity regulations. 

Mexico enjoys several buffers: foreign reserves that oscillate around $190 bn in addition to a committed flexible line of credit with the IMF for around $70 bn. On top of these, the central bank injects $52 mn on a daily basis to boost liquidity conditions regardless of the level where the exchange rate is trading. In addition to these measures, should USD-MXN depreciate more than 1.5% from the previous day fixing (determined by the central bank) then Banxico (CB) offers an additional $200 mn via auctions, estimates Commerzbank. 

From a macro perspective, Mexico does not have significant imbalances that could pose an immediate threat in addition to a government (MoF) that is running prudent fiscal policy. That said, while the peso is not immune to market gyrations in the next days, it should have the strength to recover once the dust settles, added Commerzbank.