Mexican Peso Declines as Central Bank Scales down Economic Growth Forecast

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Mexican Peso Declines as Central Bank Scales down Economic Growth ForecastThe Mexican peso declined to its lowest level in one week after the central bank revised downwards the country’s economic growth rate for this year, the second time to do so. Banxico expects the Mexican economy to expand by 2.3 percent to 3.3 percent in 2014, down from an earlier estimate of 3 percent to 3 percent.

The peso fell almost 0.1 percent to 12.9138 against the U.S. dollar in mid-day trading in Mexico City, the lowest so far since last Thursday.

“Banxico’s forecast surprised because the revision was more negative than expected,” Alexis Milo, a Mexico City-based chief Mexico economist at Deutsche Bank AG told Bloomberg. “Banxico will stick to its current monetary policy and will go higher in tandem with the Fed.”

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Banxico has retained the benchmark lending rate at an all-time low of 3.5 percent for nearly 7 months in a bid to stimulate the sluggish economic growth. Yield on Mexican peso-denominated bonds that mature in 2024 plunged 0.01 percentage point or one basis point to 5.91 percent on Wednesday. The price rose 0.12 centavo to stand at 132.10 centavos per peso.

The Indian rupee declined the steepest in four weeks as importers purchased dollars to meet their debts, rushing to benefit from the stronger rupee after it hit the highest level since last June.

The rupee fell 0.2 percent to trade at 58.78 against the dollar, the largest decline since April 23. The currency rose to 58.3750, a near-one year high, after the main opposition party Bharatiya Janata Party clinched the majority seats in the parliament. This fuelled optimism that it will enact favorable policies to spur growth without being encumbered by divisive coalition politics. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com