Mexican Currency rallied today after the Federal Reserve cut U.S. interest rates. Investors were lured by Mexico’s fixed income market yielding 7.5% after the Fed dropped the U.S. rate to 3.5%. With the spread between the yields of the Mexican Currency and U.S. dollar widening Mexican assets are beginning to look a lot more attractive.

This gain of 0.6% in the Mexican Currency comes after a sharp drop of 1% yesterday, the largest decline in five months, as investors fled global stock markets and emerging-market currencies fearing a global recession. The gain was however far from being as promising as the 2.1% advance in the Brazilian Real and the 1.3% jump in the Chilean peso.

Mexico sends about 80% of its exports to the U.S. and fears a U.S. recession would decrease demand for exports has limited the Mexican Currencies recovery. However, this fear of declining export demand from the U.S. has eased fears that inflation will get out of control, increasing demand from pension funds for bonds.

Mexico’s cost to borrow decreased to the lowest in nine months with the Mexican government selling its three-year bond at a yield of 7.52%, lower than the 7.81% recorded last month.