Mexican stocks erased early gains on Friday while the peso currency partially recovered from initial losses after Mexico's central bank tightened monetary policy to check inflation.
In mid-morning trade Mexico's benchmark IPC index was up 0.12 percent at 9728.56 after earlier reaching 9800.
Mexico's central bank said on Friday it increased its money market "short" to 33 million pesos per day from 29 million pesos, tightening its restrictions on lending to commercial banks in a bid to drive up interest rates and put a brake on inflation.
Market watchers had expected another tightening of policy, but not until later in March after inflation data for the first half of the month is released.
Jesus Viveros, an analyst at Bursametrica consultancy, noted the main effect of the bank's move was upward pressure on interest rates. The overnight Cetes T-bill rose 0.25 point to 6.60 percent in reaction to the rise in the "short" amid less liquidity in the market. "The market's performance was much more favourable before, but after the news of the short it showed a decline, although it remains in positive territory," he said, noting the stock market was tracking US markets and rebounding from prior losses.
Investors usually switch out of stocks and into fixed-rate markets for a better return on their money as interest rates move higher.
The bank's move had little impact on the foreign exchange market, which has been calm in recent days despite the Madrid attacks that unsettled world markets on Thursday, Viveros said.
"What is influencing the market is the expectation of a greater inflow of dollars into the country due to the sale both of Apasco and the offer of Bancomer next week. That has also contributed to keeping the market stable," he said.