USD/MXN hits fresh lows near 18.00 as Banxico raises rates to 7%

The Mexican peso rose further across the board after the Bank of Mexico rose the overnight interest rate, as expected, from 6.75% to 7%. 

Mexico: Central bank raises rates to 7% as expected

USD/MXN continued to decline after the decision and bottomed at 18.02, the lowest level since Tuesday. Then it rebound and near the end of the session, it was hovering around 18.05, down 0.93% for the day. 

The pair is again moving toward the 18.00 handle. At the beginning of the week, it tested multi-month lows around the 17.90 zone but failed to break to the downside and rebounded. It reached 18.30 yesterday, the highest level in two weeks. 

The bullish correction was short-lived and USD/MXN weakened again. The pair needs to break the 17.90 area, that is a very strong support in order to open the doors to another slide. 

End of hikes?

Today’s rate hike from Banxico was expected. Now, many analysts consider that the central bank is likely to end the tightening cycle. Despite not raising rates more, the rate bias could continue to benefit the Mexican peso. 

What Banxico does at the next meeting is likely to depend on inflation data and the Federal Reserve policy.