September 16, 2016 / 1:37 PM / 2 years ago

UPDATE 2-Mexican peso closes at record low, inching toward 20/dollar

(Adds closing peso price, adds quote)

By Jean Luis Arce

MEXICO CITY, Sept 16 (Reuters) - The battered Mexican peso closed at a record low on Friday, creeping ever closer to the key 20 pesos per dollar psychological barrier, after data showed U.S. consumer prices increased more than expected in August.

The peso, which has dropped just under 14 percent so far this year, ended the day down 1.33 percent at 19.6200 pesos to the dollar.

The peso also reached a record intraday low of 19.777 pesos per dollar, surpassing its previous nadir on June 24, the day after Britain voted to leave the European Union.

The U.S. data points to a steady build-up of inflation that could prompt the Federal Reserve to raise interest rates this year, and drive outflows from Mexican assets.

“This is the beginning of volatility in both directions,” Nomura Securities analyst Benito Berber said. “It’s not unlikely that we will see the peso below 19 or above 20.”

The upcoming poll numbers of Democratic presidential contender Hillary Clinton and her Republican counterpart Donald Trump will also affect the peso’s trajectory, Berber added.

The peso has weakened nearly 4.5 percent this month on concerns that Trump could win the Nov. 8 U.S. election after polls showed him gaining ground against Clinton.

Late on Thursday, the deputy governor of the Bank of Mexico, Manuel Sanchez, said the bank would pay close attention to inflationary pressures stemming from the weak peso while deciding monetary policy.

Mexican markets were closed on Friday for a national holiday the peso continued to be traded. (Reporting by Jean Luis Arce; Editing by Bill Trott and Richard Chang)

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