The Mexican peso closed at its best against the dollar for the past three weeks after the Bank of Mexico (Banxico) announced that your key interest rate falls from 4.25% to 4%, as expected by the vast majority of market participants.
In wholesale activities, eThe exchange rate ended this afternoon at 19.96 pesos per dollar, which corresponds to a profit from the Mexican currency of 0.4% or eight cents with regard to Wednesday.
This is the best level of the peso since Jan. 21, when parity reached 19.71 units, according to Bloomberg information. In retail, the dollar eventually sold 20.37 pesos and it marked a decrease of 12 cents from Wednesday.
Since this morning, the dollar has lost ground to the peso, falling below 20 units amid investor optimism on the expectation that the Federal Reserve (Fed) will keep interest rates low for longer, despite less inflationary pressures in the United States. States, and confidence that negotiations on a fiscal stimulus are moving forward in the US Union, Banorte analysts said.
During the afternoon, The dollar continued to trade at less than 20 units after Banxico announced its key interest rate would fall 0.25% Starting tomorrow, as expected by BBVA, Banorte, Santander, CitiBanamex and 19 other financial institutions.
The decision was taken unanimously by the members of the Board of Directors of the Central Bank, putting interest rates at their lowest level in the last five years since June 2016, when it was 3.75%. Banxico announced the cut despite consumer prices rising more than expected in January, piling above the 3% inflation target for eight months.
“Falling rates with inflation above target is a perverse stimulus to public finances,” said Alfredo Coutiño, Latin America director at Moody’s Analytics this afternoon.
“It wouldn’t be a surprise to see the 2014-2015 episode again, with rates of 3% and rising debt,” Coutiño wrote on his Twitter account.
Article 28 of the Constitution states that Banxico’s main purpose is “to ensure the stability of the purchasing power of the national currency”, that is, price stability or low inflation.
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