Mexican Peso Soars As Banxico Hikes Interest Rates

By Joseph Adinolfi Markets MarketWatch Pulse

The Mexican peso strengthened against the U.S. dollar on Thursday after the country's central bank raised its benchmark interest rate by half a percentage point. Banxico, as the central bank is widely known, has now raised interest rates by half a percentage point three times since U.S. President Donald Trump's victory in the Nov. 8 election. The dollar fell 0.8% to 20.34 pesos after the decision, compared with 20.50 pesos late Wednesday in New York. The peso, which fell to record lows in the wake of Trump's election, has recovered in the months since as investors adopted a wait-and-see approach regarding Trump's trade policies. Trump has embraced unabashedly protectionist rhetoric, warning that he'd like to renegotiate the North American Free Trade Agreement between the U.S., Mexico and Canada, or possibly scrap it all together. He has also threatened to impose steep tariffs on Mexican imports. These moves could damage the Mexican economy because the U.S. is its largest trading partner. The rate hike was widely anticipated by economists.

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