The Mexican peso depreciated on Thursday morning as the dollar gained ground on new economic data that raised expectations of a more restrictive monetary policy.
US retail sales unexpectedly rose in August as lower gasoline prices supported spending, showing another sign that the US economy could tolerate higher interest rates from the Federal Reserve to fight back. against persistently high inflation.
The dollar held near recent highs on Thursday, supported by signs that the Fed will be even more aggressive next week.
The peso was trading at 19.9690 per dollar, down 0.14% from Wednesday’s Reuters benchmark price.
The dollar remains stable while the market awaits the Fed meeting
The dollar held near its recent highs, supported by views that the Fed will continue to tighten policy aggressively, while the Swiss franc hit its highest level against the euro since the Swiss National Bank removed its floor on the currency. in 2015.
The franc rose 0.5% against the euro to 0.9529 francs, its highest level against the single currency since Jan. 15, 2015, the day the SNB scrapped its minimum exchange rate of 1.20 francs per euro.
The franc was also up 0.7% against the dollar at 0.95645 francs.
“The Swiss currency is the only safe haven in the G10 right now and I think that’s attractive to investors as next week with the FOMC could be another choppy week for equity markets if the Fed raises 75 or even 100 basis points,” said Kenneth Broux, senior strategist at Societe Generale.
The Swiss National Bank will also meet next week. Money markets are fully pricing in a 75 basis point rate hike by the SNB, with just under a 50% chance of a one percentage point hike, according to Refinitiv data.
The euro was little changed at $0.9982, not far from the 20-year low of $0.9864 hit last week, while the British pound was down 0.4% at $1.1492.
The dollar rose 0.3% against the Japanese currency to settle at 143.55 yen, after falling 1% on Wednesday after news that the Bank of Japan had reviewed exchange rates with banks, a possible preparation for the purchase of yen
The dollar index was firm at 109.71, retaining its 1.5% gain from Tuesday, when US inflation data came in higher than expected. This caused markets to reposition themselves for a big rate hike from the Fed at its meeting next week.
Federal Reserve funds futures are now pricing in a 30% chance that the Fed will raise rates by 100 basis points, while the market expects a hike of at least 75 basis points.
The foreign-traded yuan fell to 7 per dollar in European trading on Thursday, the first time it has broken that level since July 2020, as markets continue to test Chinese authorities’ willingness to defend the token level.
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