The Mexican peso rose to a one-month high as traders weighed whether the Federal Reserve will raise U.S. interest rates on Thursday for the first time since 2006, which could prompt policy makers in the Latin American nation to do the same next week.
The Mexican currency rose to as high as 16.5219 per dollar in Mexico City, the strongest since Aug. 19. It was little changed at 16.5473 per dollar at 10:18 a.m. in Mexico City.
The peso has stabilized after a surge in projections for its fluctuations prompted the central bank to sell dollars in supplemental auctions last month. Implied volatility surged on Aug. 24 to an almost two-year high on concern over China’s yuan devaluation and how the Fed’s decision would impact Mexican bonds and the nation’s monetary policy. Mexico, which sends about 80 percent of its exports to the U.S., changed its rate-decision calendar in July so Banco de Mexico, known as Banxico, decisions would come days after the Fed policy makers meet.
“They have been very vocal about following the Fed,” Pablo Cisilino, a money manager at Stone Harbor Investment Partners LP, said in an e-mail. “By following the Fed, Banxico is emphasizing the U.S. economy link, which makes a lot of sense.”
The Fed’s policy decision is due at 2 p.m. in Washington. Futures traders see only a 34 percent chance that policy makers will raise rates on Thursday, while 54 of 113 economists surveyed by Bloomberg predict some kind of increase.