Ella 
USD/MXN ended lower for the third consecutive trading day, trading around 18.90 in late Asian trading on Friday. USD/MXN fell despite the Bank of Mexico’s (Banxico) surprise decision to cut its benchmark interest rate from 11.00% to 10.75% at Thursday’s meeting.
Mexico’s central bank signaled it may further adjust interest rates, citing persistent inflation risks. The 12-month inflation rate rose to 5.57% in July from 4.98% previously, in line with market expectations. This is the highest value since May 2023.
Meanwhile, core inflation rose 0.32%, slightly above the 0.29% forecast. Headline inflation also rose 1.05% in July, the largest increase in nearly three years and slightly above expectations of 1.02%.
The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar (USD) against six major currencies, was lower near 103.20. Falling U.S. Treasury yields have put additional pressure on the dollar, with yields at 4.01% and 3.97% at press time.
The dollar faces challenges as expectations grow that the Federal Reserve may cut interest rates by a quarter of a basis point in September. Traders are taking mixed signals from the U.S. economy as they try to gauge whether it will see a soft landing or a recession.
Rising safe-haven flows amid heightened geopolitical tensions in the Middle East may have limited the dollar’s downside. Israeli forces stepped up airstrikes in the Gaza Strip, causing at least 40 casualties on Thursday, according to Palestinian medics.
The escalation further intensifies the conflict between Israel and Hamas-led militants, as Israel prepares for the possibility of a wider regional conflict following the killings of senior Hamas and Hezbollah members.
