Fed Rate Cut Boosts Mexican Peso at Market Close
The boost came as the Fed announced a 25-basis-point cut to its benchmark rate, bringing it into the 4.00%-4.25% range.
Quick overview
- The Mexican peso strengthened against the U.S. dollar, marking its eighth consecutive winning session with a cumulative appreciation of 2.25%.
- The Federal Reserve's recent 25-basis-point interest rate cut has fueled demand for emerging-market currencies, including the peso.
- Despite a volatile trading day on Wall Street, the Dow Jones Industrial Average rose while the S&P 500 and Nasdaq experienced declines.
- Analysts predict the peso will remain supported by dovish Fed policies, but potential risks could arise from souring market sentiment or rising U.S. yields.
The Mexican peso extended its rally on Wednesday, closing stronger against the U.S. dollar after the Federal Reserve resumed interest rate cuts, a move that fueled appetite for emerging-market currencies.
With the advance, the peso notched its eighth consecutive winning session, bringing its cumulative appreciation to 2.25% in that stretch.
According to data from Banco de México (Banxico), the peso settled at 18.3186 per dollar, a gain of 0.23% or 4.18 cents from Monday’s close. The move pushed the currency to its strongest level since July 23, 2024, when it touched 18.1690 per dollar.
The boost came as the Fed announced a 25-basis-point cut to its benchmark rate, bringing it into the 4.00%-4.25% range. While widely expected, the decision confirmed the central bank’s shift toward a more accommodative stance.
The updated “dot plot” signaled two more cuts before year-end, a dovish tilt that weighed on the dollar globally. The ICE Dollar Index (DXY), which tracks the greenback against six major peers, rose 0.36% on the day to 96.98 but remains under pressure as markets anticipate further easing.
Wall Street: Stocks Performance
On Wall Street, trading turned volatile after the Fed’s move. The S&P 500 slipped 0.1% to 6,600.35, while the Nasdaq fell 0.33% to 22,261.33, pressured by weakness in tech. The Dow Jones Industrial Average bucked the trend, rising 0.57% to 46,018.32 after fluctuating during Fed Chair Jerome Powell’s press conference, in which he highlighted growing risks in the labor market.
The Fed’s decision and forward guidance will now test Wall Street’s recent rally, which has been underpinned by expectations of rate cuts and renewed enthusiasm around AI-linked stocks. But sentiment took a hit Wednesday as Nvidia dragged on the Nasdaq: shares fell after a report that China’s internet regulator had ordered the country’s top tech firms to halt purchases of all chips made by the AI leader.
Looking ahead, analysts expect the peso to remain supported as long as Fed policy stays dovish and U.S. labor data remain weak. However, a sustained rally could face headwinds if risk sentiment sours or if U.S. yields rebound unexpectedly.
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