Mexican Peso Erases Losses as Bank of Mexico Doesn’t Cut Interest Rates

The Mexican peso trimmed its losses versus the US dollar today after the nation’s central bank left it key overnight interbank funding rate unchanged for the 26th consecutive meeting, disappointing traders who expected an interest rate cut.

The Banco de Mexico left it main interest rate at the record low of 4.5 percent today. The Bank was keeping the target rate at this level since July 2009. Many speculators expected an interest rate cut and were frustrated as the central bank announced its decision. The peso recovered some of its losses as the cut was priced in.

The Mexican currency still doesn’t look attractive. The currency has slid 3.8 percent in the past four weeks and was the worst performer among most-traded currencies. The weakness of the peso may be one of the reasons that made the central bank to refrain from cutting interest rates.

USD/MXN closed at 12.9738 today after it opened at 12.9678 and jumped as high as 12.9780.

If you have any questions, comments or opinions regarding the Mexican Peso,
feel free to post them using the commentary form below.