USD/MXN: Banxico’s proactive rate hike supports the peso – Scotiabank

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The Mexican peso is currently holding a small gain against the US dollar so far this year. Sharp rises in domestic interest rates have supported the MXN and Scotiabank economists expect policymakers to tighten rates further, keeping the MXN USD/MXN within recent ranges.

The peso is supported by a tighter monetary policy

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“Banxico’s proactive rate hikes are possibly the main factor behind the peso’s strength, and we anticipate that for the short term, we will continue to see its rate hikes matching the pace set by the Federal Reserve, maintaining the interest rate spread between the two countries about 600 basis points.”

“There are some risks looming on the horizon, such as USMCA arbitration against Mexico by Canada and the United States over energy policy, inflation risks to what are so far resilient remittance flows, as well as the continued weak foreign investment, but we don’t see them being a major headwind for the MXN during this calendar year.”

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Source: Fx Street

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