Brexit Burns Mexico as Peso Plunge Spurs Wagers on Rate Increase

26/06/16 Bloomberg

peso by Guanatos GwynThe U.K.’s vote to leave the European Union is reverberating loudly in Mexico.

The peso tumbled the most since 2011 on Friday, hitting a record low in the wake of the results of the Brexit referendum. After weakening further Monday, it’s now down 9.7 percent this year, the biggest plunge among the world’s major currencies.

The U.K. vote and the peso drop prompted BNP Paribas SA to bring forward its forecast for an interest-rate increase in Mexico by six months to this week, and swaps traders to boost bets for higher borrowing costs by the most in a month. With the currency’s deepening slide threatening to fan inflation in Latin America’s second-biggest economy, central-bank officials led by Governor Agustin Carstens will probably lift the 3.75 percent benchmark as a “preventive move” when they meet Thursday, said Credit Suisse Group AG’s Alonso Cervera.

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