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Analysis – Is the party over? Mexican Peso May Retreat Strong Gains in 2023 By Reuters

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© Reuters. FILE PHOTO: The Mexican peso is seen in this illustration on August 3, 2017. REUTERS/Edgard Garrido/Illustration/File Photo

Written by Noe Torres

MEXICO CITY (Reuters) – Gains in the Mexican peso, which ends 2022 with one of its strongest performances in a decade, may fade in 2023 after an expected end to the Bank of Mexico’s rate hike cycle and a possible recession on top of trade. US partner.

Last month, the peso returned to pre-pandemic levels and rose more than 5% against the US dollar in 2022, making it one of the best-performing global currencies alongside the Brazilian real.

But the peso’s impressive rally may come to an end as markets expect large capital inflows to Mexico in recent months, attracted by the Bank of Mexico’s restrictive monetary policy stance, to slow soon.

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Banxico, as the central bank is known, has been increasing its benchmark interest rate since June 2021 to curb inflation, raising it to a record 10.5% at its latest policy meeting.

In the coming months, Banxico is expected to end the cycle of interest rate hikes and possibly break away from the US Federal Reserve, which has been consistently seen to raise interest rates. This would narrow the price differential and could lead to an outflow of capital.

“The carry trade, the phenomenon that (the peso) has benefited from this year, is likely to dissipate a bit,” said James Salazar, an analyst at CI Banco. The carry trade refers to a trading strategy based on taking advantage of the yield differentials between Mexico and other economies.

The peso’s strength, which President Andrés Manuel López Obrador often boasts as one of his government’s major achievements, has benefited from a strong inflow of remittances, growth in exports and foreign direct investment.

Concerns about a recession in the United States and a trade row Mexico is engaging with the United States and Canada over Lopez Obrador’s energy policy, which critics describe as nationalist, souring the peso’s outlook.

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Banco Base said that “the perception of risk may rise due to consultations within the framework of the USMCA (trade agreement), which could lead to the imposition of measures against Mexico.”

Traders on the Chicago Mercantile Exchange, who are considered the leaders in market sentiment, began betting that the peso would start to fall.

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IIFL Finance to raise funds via public issue by Reuters

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MUMBAI (Reuters) – India’s IIFL Finance plans to raise at least 1 billion rupees ($12.10 million) through the public issuance of a non-convertible bond, according to a product note.

The issuance, which also contains Greenhoe’s option to retain the oversubscription of Rs 9 billion, will open for subscription on Friday and close on January 18.

The company offers bonds maturing in two, three and five years at an annual coupon in the range of 8.50% to 9% for investors.

Equirus Capital, Edelweiss, Trust Investment Advisors and IIFL Securities are the lead managers for the bond issue, which is rated AA by CRISIL and ICRA.

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Fundraising through public issuances is expected to pick up slightly in 2023 as retail investors bet on attractive interest rates and companies look to diversify their funding portfolio amid tightening liquidity conditions.

($1 = 82.6600 Indian Rupees)

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Economic weakness expected to weigh on oil prices in 2023 by Reuters

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© Reuters. FILE PHOTO: The sun is behind a crane pumping crude oil in the Permian Basin in Loving County, Texas, US, November 22, 2019. (Reuters) / Angus Mordant // File Photo

By Brijesh Patel

(Reuters) – Oil prices are set to make slight gains in 2023, a Reuters poll showed on Friday, as a darkening global economic backdrop and the outbreak of COVID-19 in China threaten demand growth and offset the impact of supply shortages caused by sanctions on Russia. .

A survey of 30 economists and analysts forecast the price per barrel to average $89.37 in 2023, about 4.6% below the consensus of $93.65 in the November poll. The global benchmark will average $99 per barrel in 2022.

The price is expected to average $84.84 per barrel in 2023, compared to $87.80 in the previous month.

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“We expect the world to slide into recession in early 2023 as the effects of high inflation and higher interest rates are felt,” said Bradley Saunders, associate economist at Capital Economics.

Brent crude has fallen more than 15 percent since early November and was trading around $84 a barrel on Friday, as rising COVID-19 cases in China dampened expectations of oil demand growth in the world’s largest importer of crude oil. [O/R]

“The oil market remains tight despite a weak global demand outlook as recession fears mount,” said Edward Moya, senior analyst at OANDA, adding that China will be the primary focus in the first quarter of next year.

Most analysts said that oil demand will grow significantly in the second half of 2023, driven by the easing of COVID-19 restrictions in China and central banks adopting a less aggressive approach to interest rates.

The poll showed that the impact of Western sanctions on Russian oil is expected to be minimal.

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“We don’t expect an impact from the price cap, which is designed to give bargaining power to buyers from other countries,” analysts at Goldman Sachs (NYSE:NYSE) said in a note.

This week, Moscow signed a decree banning the supply of oil and its products to the countries participating in the Group of Seven (G7) from February 1 for a period of five months.

“In the event of a sharp decline in Russian exports (which we do not expect to happen), OPEC + will most likely be willing to increase production to prevent prices from skyrocketing,” said data and analytics firm Kepler.

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Indonesia’s inflation rate rose in December to 5.51% year-on-year, according to Reuters

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© Reuters. FILE PHOTO: People cross a main road outside a shopping mall during afternoon rush hours in Jakarta, Indonesia, November 30, 2022. REUTERS/Willi Kurniawan

JAKARTA (Reuters) – Official data showed on Monday that inflation in Indonesia rose slightly in December and remained above the central bank’s target range for the seventh consecutive month.

The headline annual inflation rate rose to 5.51% in December, compared with 5.42% in November and the 5.39% expected by analysts polled by Reuters. Bank Indonesia’s inflation target range is 2% to 4%.

The annual core inflation rate, which excludes government-controlled prices and volatile food prices, rose to 3.36% from 3.30% in the previous month, while a Reuters poll expected a rate of 3.39%.

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