The Mexican peso lost about 9.6% of its dollar value between Sept. 4 and Oct. 23, putting a Nov. 5 policy decision by Banco de México in focus for currency markets.
Banco de México's daily FIX rate was 16.8748 pesos per dollar on Sept. 4 and 18.6670 on Oct. 23. A higher FIX quote means more pesos are needed to buy one dollar. Calculated from the reciprocal exchange rate, the move represents an approximately 9.6% decline in the peso's dollar value.
Chris Turner, ING's Global Head of Markets and Regional Head of Research for UK & CEE, attributed the peso's weakness to dovish rhetoric from Banxico. He warned that the interest-rate spread could reach a record low if Banxico did not match a Fed rate hike presumed for December. ING forecasts USD/MXN at 19.00–19.10 in the coming weeks absent a hawkish surprise at Banxico's Nov. 5 meeting.
Banxico's Governing Board voted unanimously to hold its overnight interbank rate at 6.50% on Sept. 24. The Federal Reserve's target range stood at 3.75%–4.00% after a 25-basis-point increase took effect Sept. 17, leaving Banxico's rate 250 to 275 basis points above the U.S. range.
Explaining the hold, Banxico said the two economies were in different phases and that local policy would be set on domestic conditions, rather than automatically shadowing the Fed. Minutes from Banxico's September meeting record that some board members saw room for a rate cut if disinflation continued.
Federal Reserve minutes show a majority of officials saw another increase as potentially appropriate before year-end, with future choices dependent on incoming data. The Federal Reserve is scheduled to meet Tuesday and Wednesday, Oct. 27-28, before Banxico's next rate decision on Nov. 5.
Turner also warned that technology market unrest may be weighing on the peso. The International Monetary Fund's (IMF) October financial stability report compares U.S. equity holdings across jurisdictions, including Mexico, and identifies a possible AI-related market correction as a global risk. It does not establish that such stress caused the peso's decline.
EconoTimes previously covered the peso's Oct. 21 daily decline.
