The Mexican peso experienced a decline, trading at 19.55 per USD, retreating from the recent four-week high of 19.12 achieved on September 17th. This fluctuation comes as investors brace for the imminent monetary policy decision from the Bank of Mexico, while the strengthening of the US dollar exerted additional pressure on the peso.
While many economists predict a modest rate cut, there is an increasing speculation surrounding the possibility of a more significant reduction of 50 basis points, driven by an unexpected slowdown in inflation. Mid-September’s headline inflation dipped to 4.66% year-on-year, while core inflation decreased to 3.95%, marking its slowest rate since February 2021.
The peso's downturn also reflects the diminishing effects of the Peoples Bank of China's stimulus measures, which had previously bolstered emerging market currencies and enhanced the carry trade that favored the peso.
On September 26, the exchange rate dropped 0.0958 or 0.49%, with the USDMXN settling at 19.5471, down from 19.6429 in the previous session. Analysts forecast that the peso will trade at 19.85 by the end of this quarter, with expectations to reach 20.27 in the next twelve months.