The Mexican peso has lost ground against the dollar following the Federal Reserve’s announcement

The Mexican peso became the most depreciated emerging market currency this Wednesday, dropping by 0.81%, followed by the South Korean won with a 0.15% decline, and the Indian rupee, which fell 0.12% against the U.S. dollar.

The Mexican currency lost ground to the dollar, returning to levels seen on September 12, when the U.S. dollar traded at 19.4724 pesos.

During the session on September 18, the peso-dollar exchange rate declined by 0.81%, equivalent to a 15.42 centavo loss, closing at 19.2941 pesos per dollar.

The volatility in the foreign exchange market is due to the surprising 50 basis point (bps) rate cut by the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve.

During its press conference, the Fed provided its economic projections, expecting an additional 50 bps cut this year and another 100 bps cut by 2025. With this information, the benchmark interest rate is projected to end 2024 in the 4.25% to 4.50% range, and between 3.25% and 3.50% in 2025.

There was significant volatility in the currency market because there was no consensus on how much the Fed would cut rates. Additionally, there are concerns that the U.S. economy is deteriorating rapidly and could fall into recession in the coming months, which would affect the Mexican economy and, consequently, the exchange rate.

The U.S. Dollar Index (DXY) remained relatively unchanged, increasing by only 0.04% to 100.94 points, compared to yesterday’s close of 100.92 points. The index has been on a downward trend since September 11, when it traded at 101.68 points, marking a 0.67% decrease as of today’s close.

However, the Mexican peso was the most depreciated emerging market currency this Wednesday with a 0.81% loss, followed by the South Korean won (-0.15%) and the Indian rupee (-0.12%).

The most appreciated currencies were the Taiwanese dollar (+0.06%), the Argentine peso (+0.04%), the Russian ruble (+0.02%), and the Chilean peso (+0.01%).