By Noah Torres
MEXICO CITY (Reuters) – The Mexican peso dipped to its highest worth in opposition to the U.S. greenback in seven years on Monday, after practically two years of rate of interest hikes aimed toward tackling inflation that led to a fall in client costs.
Nevertheless, some analysts view the peso’s newest beneficial properties as primarily the flip facet of a weakening dollar.
The peso gained 0.95% on Monday to commerce at 17.42 pesos to the greenback, its highest stage since Could 2016.
Over the previous few years, the Mexican forex has largely hovered round 20 pesos to the greenback, however over the previous yr it holds the excellence of being the forex that has gained essentially the most in opposition to the US greenback, rising by nearly 11%.
President Andres Manuel Lopez Obrador repeatedly touts the energy of the peso as proof of sound macroeconomic insurance policies, notably his administration’s fiscal austerity and promise to keep away from incurring new debt.
However Franklin Templeton portfolio supervisor Luis Gonzali cited different elements as behind the peso’s newest surge, together with the decline within the worth of the dollar, most just lately over fears of a possible default. if US lawmakers do not increase the nation’s debt restrict to cowl already-approved spending.
“A giant half (of the energy of the peso) is the weak point of the greenback,” he mentioned, including that the Mexican financial system is additional benefiting from the rising flows of fastened funding into the nation.
However Mexico Metropolis-based Gonzali additionally acknowledged Mexico’s more healthy funds, in comparison with different rising markets the place currencies have not benefited as a lot because the peso, partly because of increased authorities spending, increased debt or looser financial insurance policies.
“Mexico turned out to be the least ugly individual on the celebration,” Gonzali joked, serving to her entice extra dance companions.
On Thursday, the Financial institution of Mexico is anticipated to maintain its benchmark rate of interest at 11.25%, halting a cycle of hikes that started in June 2021, in line with a Reuters ballot of analysts.