USD/MXN breaks above 20.50 and hits highest since June

• US Dollar gains momentum against emerging-market assets amid risk aversion. 
• Mexican peso also affected by domestic factors and crude oil sell-off. 

The Mexican peso is falling sharply against the US dollar and reached the weakest level since June. Risk aversion across financial markets affected emerging market assets while also domestic factors contributed to the slide of the peso. 

The USD/MXN broke above 20.40 and jumped to 20.57, reaching the highest intraday level since June 20. The pair is trading at 20.50, on its way to the fourth daily gains out of the last five days. 

The demand for emerging-market assets weakened today amid a risk aversion. Regarding the Mexican peso, the 4% decline in crude oil prices, higher Mexican yields and uncertainties about President-elect Andres Manuel Lopez Obrador policies weigh on the peso. The rally of USD/MXN could increase the odds of a rate hike from Banxico on Thursday.

The Mexican stocks index is falling more than 1%, at the lowest level since February 2016, while the yield of the 10-year bond stands above 8.95% to levels last seen in 2009. 

USD/MXN Levels to watch 

To the upside, a daily close above 20.50 would signal more gains ahead. Resistance levels are seen at 20.65, followed by 20.80 and 20.95. On the flip side, now 20.40 is the immediate support and then 20.25 and 20.10.