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Banxico & the prospects for high carry EM currencies

Banxico’s surprise interest rate hike highlights the growing pressure on many emerging market central banks from the combination of rising inflation and the Fed’s shift towards policy normalisation. While we think that most EM currencies will struggle over the next few months, Banxico’s proactive approach and Mexico’s relatively solid economic fundamentals suggest to us that the peso will hold up better than its peers.
Jonas Goltermann Senior Markets Economist
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