USD/MXN price analysis: Mexican Peso erases part of daily losses vs. USD
- USD/MXN renews all-time highs above 23 on Tuesday.
- Fed relaunches CPFF to ease USD funding stress.
- US Dollar Index climbs above 99.60 in American session.
The USD/MXN pair extended its rally and touched a fresh all-time high of 23.1764 on Tuesday before retreating modestly. As of writing, the pair was up 0.3% on the day at 22.9210.
DXY shoots higher on Tuesday
Heightened fears over USD funding shortage as reflected by widening three-month FX swap spreads allowed the greenback to continue to gather strength against its rivals on Tuesday. The US Dollar Index (DXY), which closed the first day of the week 0.7% lower, easily erased Monday's losses and climbed to its highest level since February 21st at 99.76.
To address the liquidity issue, the Federal Reserve announced that it will reestablish the Commercial Paper Funding Facility (CPFF) on Tuesday. "The commercial paper market is under considerable strain in recent days due to coronavirus outbreak," the Fed acknowledged in its press release.
US Treasury Secretary Mnuchin said the CPFF will provide short-term credit to help American businesses to battle the negative impact of the coronavirus.
Although the DXY retreated from its highs on this development, it's still up 1.7% on the day at 99.66 to keep the pair stay afloat in the positive territory.
Technical levels to watch for