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Mexican peso jumps after central bank raises rates at extraordinary meeting

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 17, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    USD/MXN was falling and then tumbled after the central bank surprisingly raised interest rates by 50 bps to 3.75%. The pair bottomed at 17.95, the lowest level in a month. It was trading at 18.18, down 3.60% for the day.

    The peso is the best performers across the board. Even before Banxico’s decision, it was climbing in the market boosted by risk aversion and the rally in crude oil prices.

    Last week USD/MXN jumped to 19.44 (intraday record) and then strated a corrective process.

    More announcements

    USD/MXN rose dramatically during January and February, increasing worries about financial stability and over the inflation outlook. Today the central bank announced the rate hike in order to avoid a more excessive depreciation of the currency. Agustin Carstens said that today’s action do not represent the start of a cycle and repeated that the value of the Mexican peso did not reflect the fundamentals of the economy.

    Also, Banxico said that from now it was intervening directly in the forex market ending the auctions program. It represents a change to direct market intervention, last used during 2009.

    At the same moment, Luis Videgaray, the Finance Minister, announced spending cuts for 2016 of around 0.7% of GDP.
    For more information, read our latest forex news.

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