Mexican peso has risen 9.5% against the US dollar so far this year

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Mexican inflation slows but remains above target * Brazil’s lower house backs main text for new fiscal rules * Turkish ruling party split on the economic plan, sources say By Amruta Khandekar on May 24th.

The Mexican peso staged a strong rebound from its recent lows on Wednesday after inflation data spurred expectations that monetary policy would need to stay tight, while the Brazilian real rose to a one-week high.

The peso, the best-performing currency in Latin America this year, was up 0.9% against the dollar, snapping six straight sessions of losses. Data showed consumer prices in Mexico fell more than expected in the first half of May, with 12-month headline inflation reaching 6.00% – the lowest level since September 2021. With the figure still well above the Bank of Mexico’s 3% target, analysts said the central bank was likely to keep interest rates high for a while after it halted a nearly two-year rate-hiking cycle last week.

Kimberley Sperrfechter, Latin America economist at Capital Economics, said robust wage growth in Mexico was likely to keep inflation above the central bank’s target for some time. “As a result, while Banxico’s tightening cycle has ended, we think that rate cuts will only come onto the cards in late Q4 and that monetary policy will be kept tighter than most expect over the next couple of years,” Sperrfechter said in a note.

The peso has risen 9.5% against the US dollar this year, outpacing its regional peers, on the back of strong economic growth in Mexico and the nearshoring trend in which foreign companies look to bring production closer to home. The currency as well as Colombia’s peso, which jumped 0.6% on Wednesday, were also boosted by a rise in oil prices as both countries are major crude exporters.

Source: El Financiero

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