The Mexican peso extended its losses against the US dollar on Wednesday, 11 November, weakening 0.05 percent to 18.63 per dollar. That was 2 centavos weaker than the previous day’s close, as traders raised their bets on a Federal Reserve rate increase at its December meeting.
Gabriela Siller, director of economic analysis at Banco Base, linked the move to the dollar’s strength. The peso’s depreciation coincides with a strengthening of the US dollar per its weighted index, she said, which continues rising on expectations of further Federal Reserve rate increases. October inflation came in above market expectations, she added.
Scenarios for a Fed hike
Marco Oviedo, Latin America strategist at XP Investments, set out how a December move could play out. A 25 basis point increase, with the Banco de México holding rates, would leave a 200 basis point gap between the two central banks, a historic low.
A larger 50 basis point hike could push the exchange rate to 19 pesos per dollar, Oviedo warned.
Where prices stood
Banamex quoted the dollar at 19.14 pesos to sell and 18.07 to buy. The US 10-year bond yielded 5.22 percent, while Mexico’s 10-year yielded 9.29 percent.
Other emerging-market currencies also weakened against the dollar. The Swedish krona lost 0.59 percent, the Swiss franc 0.54 percent, the Indonesian rupiah 0.52 percent, the Polish zloty 0.51 percent and the Hungarian forint 0.49 percent.
Related: Peso gains to 18.53 per dollar after Mexico's inflation data · Peso firms to 18.53 per dollar on Día de Muertos holiday
