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Mexican Peso Fell despite Positive Domestic Data

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Mexican peso fell by nearly 0.25%

The Mexican peso fell against the US dollar on December 21, 2015. It fell even though October’s retail sales were close to the consensus forecasts. Negative sentiments surrounding emerging markets and a fall in crude prices weighed on the Mexican peso. Mexico’s GDP (gross domestic product) is expected to grow by 2.3% in 2015 and 2.8% in 2016. Even though export volumes are picking up, the economy can’t recover due to more tightening by the central bank and low global commodity prices.

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Bank of Mexico interest rates rose

The Bank of Mexico increased the inter-bank rates for the first time since the recession in 2008. It decreased the rates to a low of 3%. The hike occurred on December 17 after the Fed increased the federal funds rate by 0.25%. The Mexican central bank thinks that the rate hike won’t have a negative impact on the economy. It’s important to note that 80% of Mexico’s exports go to the US. The interest hike to 3.3% enabled a slight recovery in the Mexican peso. Earlier in the month, it hit a record low against the US dollar.

Impact on the market

Latin American ETFs were trading on a mixed note on December 21, 2015. The iShares MSCI Mexico Capped ETF (EWW) ended on a slightly higher note. It rose by 0.04%. The iShares Latin America 40 ETF (ILF) fell by 0.26% at the end of the day.

Looking at Mexican ADRs (American depositary receipts) trading on US exchanges, beverage company Coca-Cola Femsa SAB de CV (KOF) rose by 1.3%. Media group Grupo Televisa SA (TV) fell by 0.40%. Construction company Cemex SAB de CV (CX) ended on a negative note. It fell by 1.7%.

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