The Mexican peso advanced today as Standard & Poor’s affirmed the nation’s credit rating and the positive outlook. The currency also rallied on hopes that US politicians will avoid potentially catastrophic default.
S&P confirmed Mexico’s BBB/A-2 foreign currency and A-/A-2 local currency sovereign credit ratings. The rating agency explained its decision:
The ratings on Mexico reflect its track record of cautious fiscal and monetary policies, which have contributed to low government deficits and inflation, bolstered economic resiliency, and contained fiscal and external debt levels. However, the sovereign’s limited fiscal flexibility and modest medium-term growth prospects constrain the ratings.
Yet reforms are expected to alleviate the problems:
The fiscal and energy reform proposals submitted by President Enrique Peña Nieto’s administration, under discussion in Mexico’s Congress, could mitigate these ratings constraints.
The peso rose on the announcement as well as on signs that US politicians are close to finding solution to the budget crisis, even if a temporary one.
USD/MXN fell from 13.1849 to 13.0728 as of 20:06 GMT today after reaching the high of 13.2350 intraday. EUR/MXN was down from 17.8340 to 17.6813.
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