(Bloomberg) – The Mexican peso registered the best month in a quarter of a century as investors began to look beyond isolation measures globally and returned to their previous concern: the search for yield.
The peso, the most traded currency in Latin America, gained 9% in May, comfortably outperforming the rally of other major currencies. In emerging markets, the Russian ruble ranked second, with a gain of around 6%.
“The markets are returning to the performance-seeking dynamic that prevailed until the covid,” said Ilya Gofshteyn, strategist at Standard Chartered Bank in New York. “The Mexican peso still compares favorably in terms of carry.”
The carry trade is a bet on higher interest rates in the country and Mexico pays one of the highest in the world, both in nominal and real terms. The interest rate is currently 5.5% after the central bank resisted a loosening of monetary policy more quickly, and officials voted unanimously to cut 50 basis points for the third consecutive time on Dec. 14. may.
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