USD/MXN: Mexican peso among the worst performers during 2016

Matías Salord FXStreet

The Mexican peso and the Turkish lira were among the worst performers during 2016. USD/MXN is trading around 20.60, up 20% from the level it had a year ago. On the flip side, surprisingly, the Brazilian real was among the biggest gainers.

Another bad year for the peso

USD/MXN has risen 40% since January 2015. The positive factor is that inflation has remained under control in Mexico; the CPI annual rate rose above 3% just in the second half of 2016.

The central bank of Mexico rose rates several times in order to keep inflation expectation under control and also following the Federal Reserve rate hike. Banxico could continue to raise rates during 2017 if the peso weakens further or if the Fed raises again. Also, Trump policies could have an impact on Mexican monetary policy.

The decline of the Mexican peso during 2016 took place despite the rally in crude oil prices and risk appetite. The currency broke above 18.00 and 19.00 for the first time ever, back in January, and after the US presidential elections jumped above 20.00 and 21.00. It was the most affected currency after the elections. It ended 2016 consolidating above 20.00, waiting for a quieter 2017?

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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