The Mexican peso weakened to 17.6 per USD in late June, its lowest level since early April, amid diverging policy outlooks for the Bank of Mexico and the Federal Reserve. The dollar advanced against both G10 and emerging-market currencies after hawkish projections from FOMC members at their latest meeting led markets to price in more than one additional rate hike by the Fed this year. At the same time, recent domestic data in Mexico have undercut the case of dovish policymakers at Banxico. Headline inflation fell more than expected to 3.55% in the first half of June, a ten-month low, while core inflation also moderated beyond forecasts. In addition to paving the way for further monetary easing at home, a narrowing interest-rate differential between the two central banks is likely to reduce demand for peso-denominated carry trades.
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SOURCE LINK : Mexican Peso Drops to April Lows
