At Banxico’s meeting yesterday, worries over the weakness in the Mexican economy outweighed concerns over the sell-off in the Mexican peso and prompted the central bank to restart its easing cycle. Banxico’s disregard for the peso’s depreciation seems justified to us, given that the MXN now looks closer to what we think its fair value is. What’s more, we doubt the exuberance over the yen-funded carry trade will resume any time soon and lead the peso to revisit its highs reached earlier this year.
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