MXN: Low risks of imminent moves to support the peso – BBH

By FXStreet According to analysts from Brown Brother Harriman, the sharp decline of the Mexican peso that is taking place since the beginning of the month, is different from the February decline and the risk of an intervention remain low.

Key Quotes:

“Ongoing MXN weakness is generating a lot of talk about a policy response by Banco de Mexico. We think the current situation is a bit different than on February 17, when the central bank announced a 50 bp intra-meeting hike in the policy rate to 3.75% and intervened heavily. As things stand now, we think risks of imminent moves to support the peso are low.”

“The timing of any moves to support the peso is key. When the February moves were announced, EM and “risk” were already rallying and so Banxico showed impeccable timing and technique. As we wrote then, Mexico’s actions could be filed perfectly under the “Golden Rules” of FX intervention: 1) surprise the markets, 2) go big, and 3) go WITH the market, not against it.”

“With the peso (and the rest of EM) on the defensive, a move now would seem to go against these “Golden Rules.” We also question whether the policymakers …read more

Source:: FX Street