Peso gains more than 10 cents after inflation data in Mexico and dollar weakness

The peso appreciated this Friday morning before a dollar decline and after inflation data in Mexico that fueled expectations that the Banxico it would raise its benchmark interest rate for the fourth consecutive time next month, and even further extend the cycle of hikes.

The Mexican currency was trading at 20.1920 units per dollar, up 0.5% compared to 20.2930 pesos per greenback at the Reuters reference price on Thursday. The weight was on track to record a moderate weekly gain.

For its part, the dollar was depreciating on news that the indebted real estate developer China Evergrande Group avoided a default, which encouraged the appetite for risk assets.

The National consumer price index (INPC) advanced 6.12% from the 6.13% registered in the second half of September, reported the Inegi. Analysts consulted in a Reuters poll projected biweekly annual inflation to accelerate to 6.09 percent.

Meanwhile, year-on-year core inflation grew at a rate of 5.12%, its highest level since June 2009.

“With inflation to remain stubbornly high, it is clear that Banco de México’s tightening cycle has to be extended,” said Nikhil Sanghani, emerging markets economist at Capital Economics.

At the last meeting there was a tough tilt and the central bank suggested that it will continue to raise rates to quell inflation above the target, “he added.

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