Peso slips again but could rally with expected interest rate hike

Mexico’s peso slipped on Thursday Nov. 17, pulling back after a modest rally this week, but an interest rate hike by the country’s central bank later in the session could support the currency.

The peso slid about 0.4 percent to 20.30 per dollar.

Reuters reported the peso dipped after the head of the U.S. Federal Reserve said the central bank could raise interest rates “relatively soon.” Higher U.S. interest rates could sap demand for emerging market assets.

The peso extended losses after U.S. consumer prices recorded their biggest increase in six months in October, backing bets for a Fed hike in December.

Mexico’s peso was battered to a record low by the election of Donald Trump as U.S. president and it shed more than 8 percent last week. The peso has gained back some ground in the past three sessions and is up more than 2 percent this week.

Economists polled by Reuters projected Mexico’s central bank could raise interest rates by 50 basis points to 5.25 percent later on Thursday but the market was tilted toward bets on a 75-basis-point hike.

Source: reuters.com