The Mexican currency ended with a strong appreciation this Thursday after the announcement by Banco de México (Banxico) to increase the reference interest rate by 50 basis points, closing the day at 20.8167 pesos per dollar, a gain on the day of 1.37% o 28.89 cents against the dollar.
The Bank of Mexico increased the target of the overnight Interbank Interest Rate by half a percentage point, to 5.50%, to face the high levels of inflation, which is at a maximum of more than 20 years.
After two days, the exchange rate returned to levels of 21 pesos per dollar. The Mexican currency recovered 2.11% or 44.8 cents in two earnings sessions, since, in addition to Banxico’s announcement, the United States Federal Reserve also communicated its monetary policy decision, which reassured the financial market.
Gabriela Siller, director of analysis at Banco Base, commented that “the appreciation of the Mexican peso was observed from the early hours of the morning, due to a greater appetite for risk. This is due to the fact that the central banks of advanced economies showed less flexible monetary stances, which is interpreted as a response to combat inflationary pressures. In addition, the monetary policy announcements generated greater certainty about the future of interest rates ”.
The Mexican peso was the most appreciated currency, followed by the Swiss franc with 0.64% and the Chilean peso with 0.55%, while the dollar weighted index closed the session with a 0.46% decrease, spinning two sessions down.
On the other hand, the dollar continues to weaken “after several central banks announced the reduction of their monetary stimuli implemented by the economic crisis generated by the pandemic.”