EMERGING MARKETS-Mexico peso firms on rate hike bets, weaker U.S. dollar

02/22/2018 Reuters

peso by Guanatos GwynLatin American currencies gained on Thursday as the U.S. dollar’s rally from a three-year low last week ran out of steam, with the Mexican peso strengthening more than 1 percent on strong bets Mexico’s central bank could again hike interest rates.

Minutes of the latest monetary policy meeting showed
Mexico’s central bank board members are concerned about
persistent inflation pressures and risks that the local currency
could be hammered, adding to consumer price pressures.

Mexico’s peso strengthened 1.15 percent on Thursday
even as consumer prices in Latin America’s second largest
economy rose less than expected in early February.
“The probability that Banco de Mexico keeps hiking the key
interest rate is still high,” said Gabriela Siller, head of
economic analysis at Banco BASE.

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EVENT ON MONDAY | The State of Mexico’s Economy

mexican pesosWHEN: Monday, January 9, 1:30-3:00pm

WHERE: 6th Floor Board Room, Wilson Center, Washington, DC

Click to RSVP

The Wilson Center’s Mexico Institute is pleased to invite you to an event with the International Monetary Fund’s Mexico team, who will present the conclusions of the recently-completed 2016 Article IV consultation with Mexico.

Mexico’s economy has been growing at a moderate pace, inflation is low, and the unemployment rate has been declining. Fiscal consolidation has begun and the financial system remains strong and resilient to severe shocks. It would be critical to adhere to the planned fiscal consolidation to put the public debt ratio on a downward path, and take steps to strengthen the commitment framework for fiscal policy. Steadfast implementation of the plan to reform PEMEX and strengthen its financial viability is also important. Future monetary policy decisions should continue to be guided by the objective of keeping inflation expectations anchored, while clear communication by the central bank is critical. The exchange rate should continue to act as the key shock absorber to help the economy adjust to external shocks. Significant progress has been achieved in strengthening financial sector prudential oversight but some gaps remain, especially in the governance framework of CNBV and IPAB. On the structural front, strengthening the rule of law and boosting female labor supply would boost potential output and reduce inequality and poverty. Going forward, Mexico will need to navigate an uncertain and complex external environment, with elevated risks of protectionism and heightened global financial market volatility.


Robert Rennhack
Deputy Director, Western Hemisphere Department, IMF

Costas Christou
Advisor, Western Hemisphere Department, IMF

Alex Klemm
Senior Economist, Western Hemisphere Department, IMF

Damien Puy
Economist,Western Hemisphere Department, IMF

Fabian Valencia
Senior Economist, Western Hemisphere Department, IMF


Christopher Wilson
Deputy Director, Mexico Institute, Wilson Center


Duncan Wood
Director, Mexico Institute, Wilson Center

Click to RSVP

A Victim of Trump (and Fundamentals), the Peso Falls

11/14/2016 Forbes.com, Mexico Institute Blog

By Viridiana Rios, Global Fellow, Mexico Institute

pesoI write today as a middle class Mexican whose savings lost 10 percent of their value when American voters elected a leader who pledged to renegotiate NAFTA and tax us to pay for a wall. As a result of the election and other factors, the Mexican peso has overtaken the Argentine peso and the South African Rand to become the emerging markets 2016 worst performer.

The Mexican Peso was a barometer for the presidential campaign. It lost 10 percent of its value when Clinton lost, 1.9 percent in the week after the FBI reignited Clinton’s email controversy, and hit its historical low in the days following the election as speculation turned to the potential impact of Trump’s first months in office. The peso spiked 1.3 percent in less than an hour during the first presidential debate, and when Trump’s lewd conversation about women broke, it gained 2.2 percent.

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Mexico peso jumps after FBI clears Clinton over emails ahead of election

11/6/16 Reuters

peso by Guanatos GwynMexico’s peso jumped on Sunday after the FBI announced it stood by a previous decision to not charge Democratic candidate Hillary Clinton over emails related to her private server, a decision that comes just two days before the election.

The peso MXN=D2, which has been hit by the rise of Republican candidate Donald Trump and his policies that are seen hurting Mexico’s economy, extended gains to rise 2.25 percent to 18.584 per dollar.

It was the currency’s strongest intraday level since Oct. 26.

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Mexican Peso Slides After U.S. Poll Shows Trump Edging Ahead

11/1/16 Bloomberg

mexican pesosMexico’s peso slid to a three-week low after a poll showed Republican candidate Donald Trump narrowly ahead in the presidential race a week before the vote.

The currency fell 1.8 percent, the most in almost four months, to 19.2088 per U.S. dollar as of 12:37 p.m. in Mexico City after the ABC News/Washington Post tracking poll placed Trump 1 percentage point ahead of Democratic rival Hillary Clinton, within the margin of error. The peso fell 0.8 percent on Friday after the Federal Bureau of Investigation said it was re-opening an inquiry into Clinton’s use of e-mail. The Brazilian real fell 1.5 percent, reversing an earlier gain.

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Mexico Peso Trades Little Changed After U.S. Presidential Debate

10/19/16 Bloomberg

peso by Guanatos GwynMexico’s peso traded in line with emerging-market peers after the third U.S. presidential debate, signaling traders saw nothing in the matchup that changed their perception of who is likely to win the election.

The currency was little changed at 18.5241 per dollar as of 6:35 a.m. in New York, paring gains of as much as 0.4 percent in the immediate aftermath of the debate. A gauge of emerging market currencies slipped 0.1 percent.

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Bank of Mexico Stresses Inflation Risk in Raising Rates

10/13/16 The Wall Street Journal 

Agustin_CarstensMEXICO CITY—The Bank of Mexico’s five board members all agreed last month that higher interest rates were necessary to stave off incipient inflation pressures amid a number of external and local risks to the Mexican peso, minutes of the meeting showed Thursday.

The board voted unanimously on Sept. 29 to raise the overnight interest rate target by a half percentage point to 4.75%, its third rate increase of the year, after the peso had again reached new lows against the U.S. dollar.

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