Overview of the Mexican Peso’s Performance
The Mexican peso appreciated slightly against the US dollar on Tuesday, despite local inflation data that support expectations of interest rate cuts. The exchange rate ended the day at 18.6297 pesos per dollar, up from Monday’s closing rate of 18.6587 pesos per dollar, according to official data from Banco de México (Banxico). This represents a gain of 2.90 centavos or 0.16% for the peso.
During the session, the dollar’s movement ranged from a high of 18.7386 pesos per dollar to a low of 18.6220 pesos per dollar. Meanwhile, the Intercontinental Exchange’s Dollar Index (DXY), which measures the greenback against a basket of six currencies, increased by 0.34% to 97.78 points.
Inflation Dilemma
Mexico’s consumer price index (CPI) rose by 0.06% in August, in line with market expectations. On an annual basis, the CPI increased by 3.57%, slightly above June’s rate but still within the official target range of 3% ±1 percentage point.
Regarding underlying prices, the monthly inflation rate was 0.22%, surpassing expectations. Annually, the underlying inflation rate remained at 4.23%, confirming the challenges Banxico faces in controlling price pressures.
“The fact that underlying inflation remains outside Banxico’s target range presents a dilemma. Although monthly inflation showed moderation, rigidity in goods and services suggests that risks persist,” said Antonio Di Giacomo, an analyst at XS.
Last month, Banxico moderated the magnitude of adjustments to the key interest rate, reducing it by a quarter percentage point. According to the meeting minute, the governing board considered further reductions in the future.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso gained slightly against the US dollar on Tuesday, ending the day at 18.6297 pesos per dollar.
- What are the recent inflation figures in Mexico? The consumer price index (CPI) increased by 0.06% in August on a monthly basis and rose to 3.57% annually. Underlying inflation also increased by 0.22% monthly and 4.23% annually.
- How does the inflation data impact the Mexican peso? Despite the local inflation report, the Mexican peso appreciated against the US dollar due to expectations of interest rate cuts by Banxico.
- What challenges does Banxico face in controlling inflation? Underlying inflation remains outside Banxico’s target range, suggesting persistent risks despite moderation in monthly inflation.
