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.
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.
via Zero Hedge http://ift.tt/1RNEQRS Tyler Durden