Mexico’s Peso Is Expected to Make a Big Comeback

01/04/2018 Bloomberg

mexican pesosFor all the concern that the U.S. might dump Nafta or that Mexico’s next president could upend economic policy, the peso is forecast to be the world’s best-performing major currency in the first half of 2018.

True, the expected gain is due in no small part to how much it sank at the end of last year. The peso tumbled to a nine-month low against the dollar on Dec. 26, capping a four-month decline fueled by worries Donald Trump will pull out of the trade agreement with Mexico and Canada, and that Andres Manuel Lopez Obrador could win election in July. The peso lost a third of its value during the past four years, when it was the worst performer among the world’s most-traded currencies.

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Mexico inflation ticks up in December, pressuring central bank

12/22/2017 Reuters

banco de mexicoWhile inflation is expected to ease at the start of next year as 2017 gasoline price increases fade from the national index, it is proving more persistent than had been expected.

The latest figure was up from a rate of 6.63 percent in November and slightly higher than the consensus forecast of a Reuters poll of financial market analysts, which predicted a reading of 6.64 percent.

The Mexican peso MXN=D2 weakened more than 1 percent after the release of the figures.

Mexico’s central bank raised its benchmark interest rate last week by 25 basis points to 7.25 percent, the highest level in nearly nine years. At the same time, the bank said that annual inflation could accelerate in December.

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Banxico’s New Governor Defends His Strict Stance on Rates

12/20/2017 Bloomberg

The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City
The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City, Mexico, June 22, 2017. REUTERS/Edgard Garrido

Mexico’s central bank Governor Alejandro Diaz de Leon reinforced the bank’s tight monetary policy stance, saying there was far too much uncertainty over U.S. trade talks and persistently high inflation to change course now.

While acknowledging the impact high interest rates have on already sluggish economic growth, the central bank sees an even larger cost if it doesn’t anchor inflation expectations, Diaz de Leon told Bloomberg TV. He led the board for the first time last week, when it voted for a quarter-point rate increase.

“As soon as those risk factors abate, maybe we can have a different trend on the exchange rate,” Diaz de Leon said. “But that’s why we have been of the view that it has been very important to have a tight monetary stance in order to have an orderly adjustment of the economy in these very uncertain circumstances.”

Mexico’s Banorte to buy Interacciones in cash-and-stock deal

10/25/2017 Financial times

pesomexicanoBanorte, Mexico’s third-biggest bank by assets, has agreed to buy Grupo Financiero Interacciones in a cash-and-share deal to create Mexico’s second-biggest financial institution, behind Spanish-owned BBVA Bancomer. The merged bank, to be called GFInter, will be the biggest controlled by Mexican capital in a country where many of the big banks are foreign. It will also be a leader in infrastructure financing, Banorte said in a statement. Banorte will pay for the deal with 13.7bn pesos in cash, representing half the value of the offer, and 109.7m Banorte shares. To fund the operation, Banorte will issue shares equivalent to some 4 per cent of the shares currently in circulation, it said in a statement. The deal is expected to close next year, pending regulatory approval.

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Mexican peso pops on news Nafta talks to extend to 2018

10/17/2017 Financial Times

pesomexicanoThe Mexican peso added to its gains while the Canadian dollar traded flat against the buck after US, Mexican and Canadian officials said there were “significant conceptual gaps” in discussions to update Nafta, stretching negotiations into 2018.

The peso strengthened as much as 1.5 per cent against the buck to MXN18.74, while the loonie also clawed back ground to trade flat on the day.

Juan Francisco Caudillo at Monex noted the peso had shed 9 per cent in the past three weeks and the Canadian dollar had also been under pressure, but the dollar’s upward trend “remains intact” despite today’s breathers for both currencies.

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Mexico finance minister says NAFTA uncertainty hitting peso

10/16/2017 Reuters

mexican pesosMEXICO CITY Mexico’s Finance Minister Jose Antonio Meade said on Monday that the peso’s recent depreciation reflects uncertainty about the NAFTA renegotiation process and questions about how quickly the U.S. Federal Reserve will normalize rates.

“The exchange rate reflects different kinds of uncertainties, many of which we cannot control, such as the normalization process of interest rates in the United States,” said Meade, speaking at an event in Mexico City.

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Mexico warns U.S. against ‘protectionist war,’ peso weakens

10/06/2017 Reuters

NAFTA_logoMEXICO CITY – Mexican officials warned on Thursday that U.S. proposals in ongoing NAFTA negotiations would result in protectionism and higher prices rather than free trade, as concerns about the future of the deal helped drag the peso to four-month lows.

Negotiators from Canada, Mexico and the United States are due to begin a fourth round of talks to renegotiate the North American Free Trade Agreement (NAFTA) in Washington next week.

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