iBlogForex » Mexican Currency

Mexican Currency Falls On U.S News

Jon — Sat, 16 Feb 2008 06:39:52 +0000

The Mexican currency (peso) dropped on concerns that demand for Mexican exports will drop, the fall in the peso came after Federal Reserve Chairman Ben Bernanke announced a deteriorating U.S. economy.

The fall in the Mexican currency wiped out early gains that were fueled by the expectation that the Mexican central bank will maintain its benchmark interest rate at 7.5% tomorrow.

Investors expect the Peso to bounce back due to the widening gap in the difference between the U.S. and Mexican interest rates, with Mexican assets looking increasingly attractive.

Bernanke explained that credit becoming more expensive and less available was causing economic growth to be restrained. He went on to state that the downside risks to growth have increased and the outlook for the economy has worsened in recent months.

It is anticipated that Banco de Mexico will begin to cut rates soon, possibly as early as next month, in an attempt to boost economic growth.

Mexican Currency To Rise In 2008

Jon — Wed, 30 Jan 2008 04:03:58 +0000

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.

The Mexican Currency Rally

Jon — Sat, 26 Jan 2008 05:44:50 +0000

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.