The Mexican peso’s strong run hits a snag following US inflation worries
For the first time in eight days, the peso moved above 17 to the dollar, a weakening that was directly attributable to the U.S. Federal Reserve chairman's voiced concern about possibly increasing inflation. The post The Mexican peso’s strong run hits a snag following US inflation worries appeared first on Mexico News Daily
The Mexican peso's impressive climb against the U.S. dollar came to an abrupt halt on Friday due to concerns over inflation expressed by U.S. Federal Reserve Chairman Kevin Warsh. On Thursday, the peso closed at 16.9752 per dollar, but shortly after Warsh's speech at the Fed's annual Jackson Hole symposium, it surged to 17.0151.
Warsh's mention of "we have work to do" to tame core inflation immediately weakened the peso. He insisted that the Fed must ensure prices are converging towards its 2% target, despite recent inflation data not signaling a change in trend. The futures market responded to Warsh's remarks by increasing expectations of a rate hike. This prompted the peso, which had been on a steady rise, to retreat, trading within a range of 17.0467 and 16.9440 by noon Mexico City time.
The peso's 7.51 centavos (0.44%) loss came as investors anticipated that Warsh's inflation comment would lead to a higher U.S. interest rate at the September meeting. This would make emerging market currencies, including the peso, less attractive, and could further weaken their value.
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