Et tu, peso? Mexican currency nears 5-year high vs. dollar

All hail the almighty peso!

The Mexican currency today rose to its highest level in almost five years against the dollar amid rising inflation jitters south of the border.

Those inflation concerns are boosting the odds that the Mexican central bank will raise interest rates this year to damp price pressures. Higher rates tend to attract global capital, or help hold on to it, which can underpin a country’s currency.

Banks were quoting 10.39 pesos to the dollar today for large transactions, down from 10.45 on Thursday and down from 10.91 pesos at the end of last year.

The upshot: You can count Mexico among the places in the world where your dollar is buying less.

The central bank held its benchmark short-term interest rate at 7.5% today for a seventh straight month (compare that with the U.S. Federal Reserve’s 2% rate), and policymakers warned that inflation pressures were "growing reason for concern."

The country’s inflation rate has been running at an annualized rate of about 4.5%, and there has been widespread speculation about a sharp jump in the prices of tortillas, a politically sensitive issue. This story explains more on the tortilla hubbub.

Mexico’s stock market has held up this year despite inflation worries. The IPC stock index eased 0.2% today to 31,486, but it’s up 6.6% year to date.

And the peso’s strength is a bonus for U.S. investors in Mexican shares: In dollar terms the IPC index is up 11.9% this year, while most U.S. stock indexes still are in the red.

The iShares MSCI Mexico Index exchange-traded stock fund has gained 10.6% this year.

Photo: Guillermo Perea/EPA

Comments

[Franc Becerra]

Et tu? This is an article about the Mexican peso. I didn't realise Hispanics were known for their fluency in French.

[Craig]

"Et Tu" isn't French, it's Latin--and Spanish is based on it just as much as French is.

[charliec]

Naw, its Appalachian for having already eaten - "I dun had vittles, did yew et tu?"

[Otto]

Sweet! Now Mexico can pay to take care of the world's problems and its citizens will be flocking back to take advantage of them power pesos!

[barbara]

Actually, during the 19th century Mexico was run by the French, Emperor Maximilian I of Mexico. Which is why many Mexicanss will have Frenchy names like Navarette.

[seo copywriter]

Wow! First the Euro, now the Peso?

[Luis]

Regarding Otto's comment, the peso will not take care of the world's problems, nor will the incompetent president of the United States or the uncalculated greediness of American bankers. However, I am sure of one thing, the American economy is held by the work of Mexican and all Hispanics who work in the country.