Mexico’s peso ‘undervalued’ as US stocks rise 2% as peso gains 2%
Mexico’s economy is in a tailspin as the peso declines, the pesocurrency’s strongest since June, according to a survey.
The survey by the country’s central bank shows the pesos have weakened 2% since the start of the year to an all-time low of $1.2298 per dollar, which was the lowest since July.
Economists expect the pesoan to weaken further as the US Federal Reserve continues to tighten monetary policy.
The central bank has been raising interest rates and boosting its balance sheet to make sure the economy can meet the countrys growing demands.
“The peso is undervalued in the market right now,” said Antonio Villalobos, head of foreign exchange research at Nomura.
Mexican President Enrique Peña Nieto says his government is not worried about the pesa’s fall.
We are not worried at all, he said during a press conference on Friday.
A weaker peso can hurt the competitiveness of Mexican companies, he added.
The pesos value was boosted by President Peña’s strong approval ratings, according the poll.
But his support is in jeopardy after the government said it will no longer consider buying back the pesan to fund its budget deficit.
Peña has said he wants to boost growth and diversify the economy.
Meanwhile, the US dollar has risen 1% against the euro since the beginning of the week.
The dollar has gained almost 30% against other major currencies in the past 12 months.
It’s the best performing currency in the world this year.
US stocks surged 2% on Friday, while the Dow Jones industrial average rose 16.9%.
The Dow Jones Industrial Average gained 11.2% to 23,068.25.
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