Mexican Peso Little Changed After Central Bank Holds Key Rate

Mexico’s peso was little changed after policy makers kept borrowing costs for a 10th straight meeting.

The currency dropped less than 0.1 percent to 16.6624. The peso had plunged 21 percent in the year through Friday, reflecting expectations for higher U.S. rates and the impact of low crude prices on growth in Mexico. Speculation the central bank would raise rates eased after the Federal Reserve left borrowing costs on hold.

Banco de Mexico’s board, led by Governor Agustin Carstens, left the overnight rate at 3 percent on Monday, as forecast by all 26 economists surveyed by Bloomberg. After a surprise half-point reduction a year ago, policy makers are looking to revive growth in the $1.28 trillion economy.

Traders will now be focused on whether the officials will change the $200 million daily limit for dollar sales or the 1 percent daily move that triggers the auctions. Carstens said last month the bank would sell an estimated $9.5 billion until Sept. 30 as part of its intervention.

Banxico will probably not extend the program because the peso weakness is due to the dollar strengthening, and the currency has outperformed most emerging-market peers in the past week, according to Alexis Milo, the chief Mexico economist at Deutsche Bank AG.

“It is debatable whether the interventions should continue for this long, especially when the Fed is in no hurry to raise interest rates.”

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