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  • Banxico says  economic deceleration has been bigger than anticipated.
  • US Dollar Index advances to 98.50 for first time since August 1.
  • Risk-on atmosphere helps EM currencies find demand on Thursday.

The USD/MXN pair advanced to its highest level since December at 20.2575 earlier today but reversed its course in the second half of the day to retrace its rally. As of writing, the pair was up only 0.18% on the day at 20,1325.

USD extends rally on Thursday

The broad-based USD strength today allowed the pair to post gains for the sixth straight trading day. The selling pressure surrounding the major European currencies and the lack of market interest to the traditional safe havens amid rising US Treasury bond yields ramped up the demand for the Greenback.

Moreover, the US Bureau of Economic Analysis in its second estimate said that the real gross domestic product in the US grew by 2% in the second quarter to match analysts’ expectations. The US Dollar Index climbed to its highest level since August 1 at 98.55 in the last hour and was last up 0.3% on the day at 98.50.

In the meantime, in the minutes of its August meeting, the Central Bank of Mexico revealed that some board members thought that the economic deceleration has been bigger than anticipated.  “All board members said the balance of risks for growth continues to be tilted downwards in the environment of marked uncertainty,” the bank added.

Despite the USD strength and the Banxico’s cautious tone, the USD/MXN pair pulled away from its highest as the upbeat market sentiment helped the risk-sensitive MXN stay show some resilience against the USD.

Technical levels to watch for