USD/MXN keeps rising above 18.60, hits fresh 4-month highs

The Mexican peso remains weak in the market and is falling on Monday, extending monthly losses. USD/MXN closed on Friday at 18.55 and recently reached 18.66, the highest level since June 5. 

The pair is up for the fourth day in-a-row and it has been rising constantly since September 25. From the level it had two weeks ago, the dollar gained more than 5%. 

Geopolitical risks, uncertainty about NAFTA renegotiations and earthquakes weigh on the Mexican peso. While the US dollar remains strong, particularly against emerging and Latin American currencies, supported by rising US bond yields as markets price in another rate hike from the Federal Reserve in December. 

Mexico: inflation finally turns 

Data released today showed that the annual rate of the Mexican CPI dropped in September for the first time since June 2016. The index rose 0.31% m/m (against 0.50% expected) while the annual rate stood at 6.35%, below the 6.66% of the previous month. 

The slowdown in inflation takes place after rising to levels last seen 16 years ago. Bank of Mexico officials left interest rates unchanged at the last two meetings, expecting the decline in inflation. Still, the rate remains above the 2-4% target range. 

The next report from Mexico will be on Thursday with August Industrial Production. While in the US, FOMC minutes on Wednesday and, CPI and retail sales data on Friday, will be the most important reports.