Market Insider

Mexican peso briefly falls 1% vs. US dollar after central bank hikes rates

Mexico Pesos
Susana Gonzalez | Bloomberg | Getty Images

Mexico's central bank raised interest rates Thursday but failed to bring any relief to the nation's beaten-down currency.

The weakened to trade about 1 percent lower against the U.S. dollar, with the currency cross around 20.39 as of 2:56 pm ET. That's just around the record levels hit last week when the peso dropped more than 12 percent against the dollar after U.S. President-elect Donald Trump unexpectedly won the election.

Andres Jaime, global FX and rates strategist at Barclays, said the central bank's announcement generally matched market expectations and the move in the peso "was related to the fact that we have Trump as a president (elect) and the outlook for external accounts" such as the trade balance and current account. He expects the dollar-peso to remain near 21.50 over the next 12 months.

Trump has called for potentially withdrawing from the North American Free Trade Agreement, building a wall along the U.S.-Mexico border, and deporting millions of undocumented immigrants. The peso has been seen as an important market indicator both before and after the election.