The Mexican peso closed at the best level against the dollar in the last three weeks, after the Bank of Mexico (Banxico) announced that the main interest rate will fall from 4.25% to 4%, as expected by the vast majority of market participants.
In wholesale operations, eThe exchange rate ended this afternoon at 19.96 pesos per dollar, which is equivalent to a gain of Mexican currency a 0.4% or eight cents compared to Wednesday.
This is the best level of the peso since last January 21, when the parity reached 19.71 units, according to information from the Bloomberg agency. In retail operations, the dollar reached 20.37 pesos and was down 12 cents from Wednesday.
This morning, the dollar lost ground against the peso and fell below 20 units amid investor optimism over expectations that the Federal Reserve (Fed) will keep interest rates low for longer, in the face of lower inflationary pressure in the United States. The United States and the confidence that negotiations on a fiscal stimulus are advancing in the American Union, Banorte analysts explained.
In the afternoon – in the afternoon, The dollar continued to trade at less than 20 units after Banxico announced that its key interest rate will fall by 0.25% Starting tomorrow, as expected by BBVA, Banorte, Santander, CitiBanamex and 19 other financial institutions.
The decision was taken unanimously by members of the central bank’s board of directors, placing the rate at the lowest level in five years, starting in June 2016, when it was 3.75%. Banxico announced the reduction, despite the fact that consumer prices rose more than expected in January and accumulated eight months above the 3% inflation target.
“Falling inflation rates above target is a perverse stimulus for public finances,” said Alfredo Coutiño, director for Latin America at Moody’s Analytics this afternoon.
“It would not be a surprise to see the 2014-2015 episode again, with 3% rates and rising debt,” Coutiño posted on his Twitter account.
Article 28 of the Constitution states that Banxico’s main objective is “to ensure the stability of the purchasing power of the national currency”, ie price stability or low inflation.
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