Peso cuts its loss after Banxico’s monetary policy announcement

The Mexican peso fell moderately against the dollar this Thursday. The local currency lost ground slightly, after having depreciated sharply early due to the global advance of the greenback in the market.

The Mexican currency recovered part of the lost ground while the market expected the Bank of Mexico (Banxico) will announce its monetary policy decision. The authority raised its benchmark rate by 50 basis points.

The exchange rate ended operations at 20.3257 units against a data of 20.2857 units yesterday, according to the Banxico. This movement meant a slight loss of only 4 cents or 0.20 percent.

The pair traded in an open range with a high of 20.4742 units and a low of 20.2309 units, which it touched after the announcement. The Dollar Index (DXY) closed up nearly 1% at a level of 104.83 points.

The central bank raised its rate by 50 basis points, in line with market expectations. Thus, the price of money in Mexico stands at 7%, which helps the carry trade against the dollar, after the Fed’s rate hike.

Last week, the US central bank also reported an increase of 50 basis points in its reference rate, in response to persistent inflation that is at a maximum of decades and does not give up.

“Banxico raised its rate by 50 basis points, to place it at 7%, the level from which it started in March 2020, when the WHO declared the Covid-19 like a pandemic,” said Gabriela Siller, Director of Analysis at Banco Base.

In the information issued by Banxico after a divided decision, the authority cited higher inflationary pressures due to new confinements in China and pressures due to the conflict between Russia and Ukraine.

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