Mexico’s peso gained the most in three weeks after central bank board member Manuel Sanchez said he doesn’t see a case for cutting interest rates, damping speculation policy makers will reduce borrowing costs next week.
The currency strengthened 0.6 percent to 12.7652 per U.S. dollar at 4 p.m. in Mexico City. It was the biggest gain since Feb. 5 and pared its advance in February to 0.4 percent.
Sanchez said in an interview at Bloomberg’s offices in Mexico City that while he doesn’t know how he’ll vote at next week’s policy meeting, he also doesn’t “see a case for a rate cut” at this time. Interbank futures contracts have been showing traders are betting Banco de Mexico will cut the 4.5 percent rate for the first time in more than three years next week. Sanchez is one of five members on the bank’s board.
“Markets are watching very closely any new information that could affect the central bank’s monetary policy decision next week,” Alonso Cervera, an economist at Credit Suisse Group AG, said in an e-mailed response to questions. “A statement by one of the board members is always important, but particularly so at tense times like right now.”
Banco de Mexico Governor Agustin Carstens said on Feb. 13 that the central bank may reduce interest rates should inflation continue to slow after the rate of consumer prices increases dropped to 3.25 percent in January, the least since October 2011. Sanchez said today that he’s concerned that inflation expectations have remained above the bank’s 3 percent target.
Mexico’s policy makers have kept the rate unchanged since July 2009.
Yields on local-currency bonds due in December increased two basis points, or 0.02 percentage point, to 4.22 percent today.
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