Mexican Currency To Rise In 2008

The Mexican currency (peso) saw gains today after the Federal Reserve cut the U.S. interest rate by 50 basis points. The move by the Fed has made yields in emerging market assets more attractive.

The Fed has lowered the benchmark interest rate to 3% in an attempt to prevent the U.S. economy from falling into a recession. The benchmark interest rate in Mexico is currently 7.5%.

The differences in interest rates have increased the flow of foreign investment, with the Mexican currency rising for the third day in a row. It’s gain so far for this week stands at 0.6%.

Mexico has predicted growth for the country will slow to 2.8%, down from the 3.2% that was estimated in 2007 due to its largest trading partner sitting on the edge of a recession.