Mexican peso leads losses among major global currencies following Banxico minutes
EWW•The Mexican peso fell about 1.2% to 18.19 per dollar after Bank of Mexico minutes showed three of five board members said rate cuts could be considered if the inflation outlook improves.
1. Peso falls after minutes
The Mexican peso weakened more than major international peers on Thursday after minutes from the Bank of Mexico’s latest policy meeting indicated that three of five board members would consider future rate cuts if the inflation outlook improves. The peso was down about 1.2% at 18.19 per dollar at 1851 GMT, with losses deepening after the minutes were released.
2. Yield gap concerns
The minutes heightened concerns that further rate cuts could narrow the yield spread with the United States. The peso had already been under pressure since the central bank held its rate at 6.50% in September and decoupled from Federal Reserve policy, fueling concerns that a smaller yield gap could reduce the appeal of carry trades.
3. Inflation and outlook
Mexico’s headline consumer price index accelerated in September, though less than expected, while core inflation moderated but remained at the upper end of the target range. Jacobo Rodríguez, an analyst at Roga Capital, said international investors were beginning to lose interest in Mexican assets and identified 18.50 pesos per dollar as significant technical resistance that could be reached in the short term if nervousness persists.
