by It was already a torrid day for commodity currencies, among which the MXN, or Mexican Peso, which were surging on today's latest crude short squeeze and then as if pulling a PBOC with just one intention - to crush the shorts - the Mexican Central Bank or Banxico, dealt a crushing blow on anyone short the MXN when it announced an unexpected 50 bps rate hike in the overnight rate to 3.75%. From the central bank: "The target for the overnight interbank funding rate is increased by 50 basis points." Perhaps the reason for the dramatic move is that Banxico, like the PBOC, no longer wants to be selling dollars to keep the currency stronger, so it resorted to the nuclear option. Sure enough: BANXICO INCREASES OVERNIGHT RATE BY 50 BPS VIDEGARAY SAYS FX COMMISSION ENDING DOLLARS SALES BANXICO MAY CONTINUE DISCRETIONARY DOLLAR SALES: CARSTENS CARSTENS: IT WAS A FORM OF PROTEST CARSTENS: FX RATE 'MISALIGNED' W/MACROECON FUNDAMENTALS CARSTENS: CEN BANK COULD MAKE EXCEPTIONAL INTERVENTIONS Carstens also added that the decision for Banxico rate increase was unanimous.
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Tyler Durden considers the following as important: Crude, Swiss National Bank, zerohedge
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It was already a torrid day for commodity currencies, among which the MXN, or Mexican Peso, which were surging on today's latest crude short squeeze and then as if pulling a PBOC with just one intention - to crush the shorts - the Mexican Central Bank or Banxico, dealt a crushing blow on anyone short the MXN when it announced an unexpected 50 bps rate hike in the overnight rate to 3.75%.
From the central bank: "The target for the overnight interbank funding rate is increased by 50 basis points."
Perhaps the reason for the dramatic move is that Banxico, like the PBOC, no longer wants to be selling dollars to keep the currency stronger, so it resorted to the nuclear option. Sure enough:
- BANXICO INCREASES OVERNIGHT RATE BY 50 BPS
- VIDEGARAY SAYS FX COMMISSION ENDING DOLLARS SALES
- BANXICO MAY CONTINUE DISCRETIONARY DOLLAR SALES: CARSTENS
- CARSTENS: IT WAS A FORM OF PROTEST
- CARSTENS: FX RATE 'MISALIGNED' W/MACROECON FUNDAMENTALS
- CARSTENS: CEN BANK COULD MAKE EXCEPTIONAL INTERVENTIONS
Carstens also added that the decision for Banxico rate increase was unanimous.
As for the punchline, it was this:
- CARSTENS SAYS RATE INCREASE DOESN'T SIGNAL RAISING CYCLE
Basically, the Mexican Central Bank became the latest one to freak out in its crusade against speculators, and the emergency move today was merely meant to crush anyone who was short the currency with a 5% move against them, one which virtually assures every position was stopped out.
Now whether the strengthening effect persists is another matter, but for now one look at the chart below shows that anyone who was long the USDMXN just had a "Swiss National Bank" moment.
And now we begin the countdown until the effect from this latest desperate central bank intervention is wiped out.
Read more here from Banxico.
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