Mexican peso/yen continues to trade in the low ¥9 range, with the focus on movements around ¥9.10 and the unwinding of IMM positions as Banxico refrains from following the Federal Reserve's rate hike. The peso's direction may change depending on the upcoming US PCE deflator.
Against the continuing impact of the US-Japan interest rate differential and yen weakness, MXN/JPY is trading in a range around ¥9.00. Although yen weakness is providing support, the peso's upside remains limited, and the prevailing view is that any rebound above ¥9.20 will be limited.
The market broadly expects Banxico to leave its policy rate unchanged at 6.50%. Inflation remains in the low 3% range, while core inflation is holding at 3.88%. With expectations of another Federal Reserve rate hike still present, Banxico is considered unlikely to resume rate cuts.
In IMM currency futures, the Mexican peso's net long position has been trending lower, falling from 94,732 contracts on 8 September to 87,782 on 15 September. This suggests that speculators are unwinding long positions rather than increasing peso selling.
Attention is focused on whether the US PCE deflator will strengthen expectations of another Federal Reserve rate hike. If PCE exceeds market expectations, the trend of higher US interest rates, a stronger dollar and a weaker peso may continue. If it falls short of expectations, concerns over a narrowing US-Mexico interest rate differential may ease.
Technically, MXN/JPY is trading below the 200-day moving average at ¥9.10, with ¥8.90–¥8.85 seen as the downside levels to watch. If it can recover ¥9.10, however, there may be room for a rebound toward ¥9.15.