The Mexican peso dropped today as Forex market participants were worried that the central bank will lower interest rates in the near future, supporting the economy, but weakening the currency at the same time.
The Banco de Mexico left its main interest rate at 4.5 percent on January 18. Yet the bank said in the accompanying statement that lower interest rates may be prudent, indicating a “downward trend in general and core inflation” and suggesting that an interest rate cut is “advisable”. Lower borrowing costs would likely translate into weaker currency.
Previously, the central bank was worrying about rising inflation. It looks like inflation is not a concern now and policy makers are more worried about economic growth.
USD/MXN rose from 12.6641 to 12.6900 as of 19:23 GMT today. EUR/MXN advanced from 16.8585 to 16.9023, while its daily low was at 16.3748.
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