Mexican Peso (USDMXN) rises, BdeM hikes interest rates by 75 bps

USD/MXN – The Mexican Peso had shown great strength against its base currency (US dollar) throughout the week, attaining its climax point yesterday. This follows the decision of the Bank of Mexico to hike its interest rate by 75 basis points. The increment was the country’s highest interest rate hike ever since 2008, when she imbibed the practice of intermittent interest rate hikes to match other countries’ currency values. This aggressive stance was taken after the Mexican inflation rate hit 7.88% last week, exceeding the BdeM target of 3%.

Consequently, the board members unanimously decided to hike its interest rate by 0.75%, bringing it to 7.75%. Furthermore, policymakers pledge readiness to extend its interest rate by as much next month if the present hike does not achieve the target of reducing inflation.

As expected, the bears have dominated the USDMXN pair throughout the week. Thus, USDMXN, which started the new week on Monday at $20.37100, is trading at $19.17100 during the Asian session today. This means the pair have lost a whopping 1200 pips this week alone.

How do fundamentals affect the Base and Counter currencies?

The base currency for USD/MXN is USD, while the counter currency is MXN.

Each currency pair is always affected by the economic news bordering on the two currency pairs.

Whenever positive news favouring the base currency (USD) circulates, it will push the pair (USDMXN) to turn bullish. This means good information for the US dollar will negatively discount the counter currency.

In cases when news is positive for the counter currency, such as the Mexican Peso (MXN), the exchange rate of the base currency, in turn, is discounted, such as the USDMXN above. This explains why the recent interest rate hike for the Mexican Peso, positive news for this currency, has led to the definite bearish trend witnessed in USDMXN throughout the week.

Forex traders must pay great attention to economic data impacting two traded currency pairs (Base and Counter currency). The rationale is that both currencies are combined to determine the trend for such currency pairs.

How does an interest rate hike impact a country’s currency?

An interest rate hike is an essential central bank’s monetary policy that strengthens the country’s currency against its counterparts. An excessive interest rate hike makes it challenging to borrow money for companies and individuals, which could increase the unemployment rate and affect economic activities in the long term.

Recent News
Start Trading Now !

Try our demo account for free to learn trading. When you’re ready, switch to a live account and start trading for real.

Popular posts

ATFX

The Firm has taken the decision to cease providing services to retail clients, with immediate effect. We are therefore unable to accept any applications.

Services to professional clients will not be impacted. For professional applications please contact [email protected]

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/ar/ to proceed.
ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/en/ to proceed.

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://atfxgm.eu/en/ to proceed.

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/en-au/ to proceed.

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/ar/ to proceed.
ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/en/ to proceed.

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://www.atfx.com/en-za/ to proceed.
ATFX

Restrictions on Use

Products and Services on this website are not suitable for Hong Kong residents. Such information and materials should not be regarded as or constitute a distribution, an offer, solicitation to buy or sell any investments.

使用限制: 本網站的產品及服務不適合香港居民使用。網站內部的信息和素材不應被視為分銷,要約,買入或賣出任何投資產品。

ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://atfxgm.eu/en/ to proceed.

ATFX

Restrictions on Use

AT Global Markets (UK) Limited does not offer trading services to retail clients.
If you are a professional client, please visit https://atfxconnect.com