This week, the Mexican peso, which made a significant move, experienced a slight appreciation against the dollar during Thursday’s session, following the Bank of Mexico’s (Banxico) announcement of a 25 basis point cut in the interest rate, bringing it down to 10.50 percent.
According to the closing report from Banxico, the Mexican currency appreciated by 0.09 percent, or two cents, from its previous close. Consequently, the exchange rate stood at 19.62 pesos per dollar.
What is the current dollar rate in banks on September 26?
At Citibanamex, the dollar is being sold for 20.13 pesos, consistent with the closing rate from Wednesday.
Moreover, the appreciation of the Mexican currency occurs amidst a general weakening of the dollar, as indicated by the decline of the DXY index by 0.33 percent to 100.58 points.
According to Banco Base, the weakening of the dollar has led to gains for most currencies, with notable appreciations including: the Chilean peso at 1.25%, the Israeli shekel at 1.17%, the South Korean won at 0.93%, the Australian dollar at 0.73%, the New Zealand dollar at 0.65%, and the Brazilian real at 0.65%.
In contrast, the currencies that depreciated the most include the Colombian peso at 0.57%, the Russian ruble at 0.54%, and the Indonesian rupiah at 0.44%.
How much did Banxico reduce its interest rate in September?
Banxico has once again made a rate cut, as was anticipated by the market, this Thursday, September 26. The institution reported a more ‘optimistic’ outlook for inflation in Mexico.
Just a week prior, the Federal Reserve (Fed) in the United States also announced a reduction in its reference rate, which now stands at a range of 4.75-5 percent.
On Thursday, Banxico cut rates by 25 basis points, resulting in a current interest rate of 10.50 percent effective Friday, September 27.
This marks the third interest rate reduction for the year, following a nearly year-long period at a benchmark rate of 11.25 percent.
After Banxico’s decision, analysts acknowledged that this move was anticipated and now expect the monetary authority to continue reducing rates until the end of the year.
Carlos Morales, director of sovereign debt at Fitch Ratings, foresees a gradual decline in inflation for the remainder of the year; however, he noted that it will likely remain above Banxico’s target (3 percent) until next year due to the peso’s weakness, which is influenced by political uncertainties stemming from proposed constitutional changes, including judicial reforms.
Analysts project that the rate may reach 10 percent by year-end, with potential further reductions in the first half of 2025, possibly bringing it down to 9.5 percent. They caution, however, that considerable risks such as geopolitical tensions, the U.S. presidential election, and exchange rate volatility persist, necessitating a cautious approach.
With information from Ana Martínez.
The Latest on the Mexican Peso and Dollar Exchange Rates
The Mexican peso has recently demonstrated resilience against the U.S. dollar, showing a slight gain during this week’s trading sessions. As of September 26, 2024, the exchange rate reached an important milestone, with the peso quoted at 19.62 pesos per dollar. This appreciation comes amid the announcement from the Bank of Mexico (Banxico), which revealed a 25 basis point cut in interest rates, reducing the benchmark rate to 10.50 percent.
Current Dollar Quotes in Major Banks (as of September 26, 2024)
Understanding the current dollar exchange rates in banks is essential for anyone engaging in currency exchanges or international transactions. Here’s a quick overview of today’s dollar quotations:
| Bank | Buying Price (MXN) | Selling Price (MXN) |
|---|---|---|
| Citibanamex | 19.05 | 20.13 |
| BBVA | 18.95 | 20.01 |
| HSBC | 19.00 | 20.05 |
| Santander | 19.02 | 20.10 |
Why the Peso is Gaining Against the Dollar
Several factors contribute to the peso’s appreciation in recent days:
- Weakening of the Dollar: A generalized drop in the dollar’s strength, reflected in a DXY index fall of 0.33 percent to 100.58 points, allows other currencies, including the Mexican peso, to gain strength.
- Interest Rate Dynamics: Banxico’s announcement of a 25 basis point interest rate cut has influenced the market, fostering a more attractive investment environment for the peso.
- Optimistic Inflation Outlook: Banxico also indicated a more optimistic outlook for inflation in Mexico, suggesting a forecast for moderate economic growth and stability.
Comparative Currency Performance
Banco Base highlighted the currencies with significant appreciation against the dollar:
- Chilean Peso: +1.25%
- Israeli Shekel: +1.17%
- South Korean Won: +0.93%
- Australian Dollar: +0.73%
- New Zealand Dollar: +0.65%
- Brazilian Real: +0.65%
Conversely, the most depreciated currencies include:
- Colombian Peso: -0.57%
- Russian Ruble: -0.54%
- Indonesian Rupiah: -0.44%
Insights on Banxico’s Interest Rate Cut
On September 26, 2024, Banxico officially announced a cut to the interest rate, now set at 10.50 percent. This decision marks the third reduction this year, with the previous benchmark rate standing at 11.25 percent for an extended period. The decision was not unanimous, as 3 of the 5 members of Banxico’s Governing Board supported the reduction.
Analysts predict that as inflation stabilizes within Mexico, there may be additional rate cuts through the end of the year. Carlos Morales, director of sovereign debt at Fitch Ratings, noted a gradual decrease in inflation is expected; however, it is anticipated to remain above Banxico’s target of 3 percent until at least next year.
Implications for Investors and Businesses
For investors and businesses, understanding these currency dynamics is crucial. Here are some practical tips:
- Monitor Exchange Rates: Regularly check rates at various banks and currency exchanges to get the best deals.
- Hedge Against Currency Risks: Consider hedging strategies if your business involves significant transactions in both currencies.
- Stay Informed: Keep up-to-date with economic news related to Mexico and the U.S., as monetary policy changes can directly impact currency valuations.
Potential Future Trends
Looking ahead, analysts anticipate that Banxico may continue to lower rates into 2025, targeting a potential rate of 10 percent by the year’s end. However, geopolitical instability and the impending U.S. presidential election could inject volatility into the market, necessitating a cautious approach from investors and stakeholders.
In conclusion, staying informed about currency trends and economic forecasts is essential for navigating the Mexican financial landscape effectively. With evolving policies from Banxico and changing dynamics in the global economy, keeping abreast of these developments will be vital for making sound financial decisions.