Mexican peso slips ahead of interest rate decision

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May 18 (Reuters) – The Mexican peso fell for the third straight day on Thursday with the country expected to pause interest rate hikes after nearly two years of tightening, while Turkey’s lira came within a whisker of its record lows.

The Mexican peso fell 0.6% against the dollar ahead of a local monetary policy decision due later in the day, where its central bank is expected to hold rates unchanged at 11.25%, halting a cycle of rate hikes that began in June 2021.

However, there was still a possibility of the Bank of Mexico raising rates, according to Juan Manuel Herrera, senior strategist at Scotiabank. “It wouldn’t be unlike Banxico to surprise economists and markets with a hike today, which could help the peso maintain its ‘super-status.

On the other hand, the end of hikes removes an important tailwind for the MXN in its current appreciation cycle—though rates remain attractive,” Herrera wrote in a note. The peso has been the best performing among major Latam currencies in 2023, rising 10.3% against the greenback, followed by the Colombian peso, which was down 0.7%.

Currencies of both leading oil exporting nations were also hurt by a slide in crude prices. Mexico’s economy likely grew 2.6% in April compared with the same month a year earlier, a preliminary estimate from national statistics agency INEGI showed.

Source: Reuters

The Guadalajara Post