By Juan Montes and Anthony Harrup / Wall Street Journal
Expectations that the U.S. Federal Reserve will raise interest rates soon has hurt currencies across emerging markets, from the Indian rupee to the Brazilian real. But for Mexico’s central-bank chief, Agustin Carstens, the selloff in the peso is overdone.
“I think there has been an overreaction in the market,” said the Bank of Mexico governor in an interview on Friday in his wood-paneled office in Mexico City. The peso has depreciated 16% against the U.S. dollar in the past year.
The peso, the world’s most-traded emerging-market currency, has been trading at its weakest level since the financial crisis of 2009, and closed Friday in Mexico City trading at 15.29 to the dollar.
While higher returns in the U.S. make currencies elsewhere less attractive to investors, Mexico’s central-bank chief says that misses a key point when it comes to Mexico: Higher rates in the U.S. mean the economy there is on more solid footing, which helps Mexican exports north of the border.