MEXICO CITY, Oct 13 (Reuters) - The Mexican peso could hold its value or even strengthen against the U.S. dollar on the back of a raft of domestic economic reforms and the country’s close ties to the United States, Mexico’s central bank chief Agustin Carstens said.
The peso has fallen more than 4 percent since May on concerns the U.S. Federal Reserve’s roll-back of stimulus and the prospect of higher U.S. interest rates could lead to capital flight and weaken currencies in emerging markets.
Analysts expect the U.S. central bank to begin raising interest rates in mid-2015.
But strong economic fundamentals in Mexico should help shore up Mexico’s peso, Carstens told Mexican newspaper Excelsior at the end of the International Monetary Fund and World Bank meetings in Washington over the weekend.
“We are very integrated with the United States, we have made structural reforms and this is going to give us a greater growth rate,” he said. “It is very possible that the peso remains stable or even tends to appreciate against the dollar.”
However, Carstens said future market volatility cannot be discounted.
Mexico’s economy wobbled early this year as a tax hike crimped consumer spending and a harsh American winter dragged on U.S. demand for Mexican manufactured exports, but growth picked up in the second quarter and is expected to rebound in the second half of the year.
Carstens also downplayed fears that Mexico’s crime problem would stem investment. Alleged abuses by security forces have fueled public anger over state violence and overshadowed President Enrique Pena Nieto’s reform agenda.
“I think it is a matter that could generate a certain geographical divergence in the country, but not in the absolute level of investment,” Carstens told Mexican paper El Universal. “Crime is being addressed and we hope that it slowly loses importance as a factor that drags on economic growth.”
Earlier this month officials found mass graves filled with burned corpses in the hills outside the city of Iguala in the restive southwestern state of Guerrero after forty-three students went missing after clashing with police.
Authorities fear many of the students may be among the victims and suspect police in league with gang members are responsible for the apparent massacre.
Separately, Mexico’s attorney general has filed murder charges against three soldiers accused of executing 22 suspected gang members in late June. (Reporting by Alexandra Alper and Michael O‘Boyle; Editing by Simon Gardner and Paul Simao)