Mexican Peso Hits Five-Month Low
The Mexican peso weakened to around 17.7 per US dollar in late September, reaching a five-month low after the Bank of Mexico left its benchmark interest rate unchanged. Banxico kept its benchmark rate at 6.50% at its September meeting, marking a shift from the Fed’s latest move, when the US central bank raised the cost of credit. Banxico said in its statement that its future decisions would not necessarily follow those of the Federal Reserve. The Fed is expected to raise rates in October. Banxico’s stance could reduce the appeal of peso-denominated assets and the currency for carry-trade operations, as the interest-rate differential would narrow further. A narrower differential reduces the currency’s buffer against periods of international volatility. Meanwhile, Mexico’s unemployment rate stood at 3% in August, matching forecasts and only 0.1 percentage point higher than in July. A tight labor market could boost consumer demand and lead Banxico to adopt a more hawkish stance.
7 per US dollar in late September, reaching a five-month low after the Bank of Mexico left its benchmark interest rate unchanged. 50% at its September meeting, marking a shift from the Fed’s latest move, when the US central bank raised the cost of credit. Banxico said in its statement that its future decisions would not necessarily follow those of the Federal Reserve. The Fed is expected to raise rates in October.
Banxico’s stance could reduce the appeal of peso-denominated assets and the currency for carry-trade operations, as the interest-rate differential would narrow further. A narrower differential reduces the currency’s buffer against periods of international volatility. 1 percentage point higher than in July. A tight labor market could boost consumer demand and lead Banxico to adopt a more hawkish stance.