Selling the Swiss franc versus the Mexican peso may not be an everyday foreign exchange play but divergent economic outlooks coupled with a positive yield might make it attractive to some forex traders. Mexico's central bank cut interest rates to a record low in June, but at 3 percent that's a world away from Switzerland's zero rate policy and the possible resort to negative interest rates alluded to by the Swiss National Bank (SNB) on September 29.
Switzerland's policymakers will have noted the country's first fall in consumer prices - down 0.1 percent in September - since February. The deflationary pressure was imported, with the price of goods brought into Switzerland falling by 1.2 percent compared to the same month last year, while domestic goods prices posted growth of 0.3 percent. A weaker Swiss franc, which negative rates would hasten, would lean against imported inflation by making the cost of foreign currency-denominated imports more expensive in local currency terms. Mexican policymakers face quite opposite problems.
Calls for significant increases in the minimum wage, if implemented, could "trigger a chain reaction on inflation expectations", the deputy head of the central bank warned late last month. Inflation for the 12 months through the first half of September slowed to 4.21 percent, below the 4.23 percent rate reached in the second half of August, but stayed above the central bank's 4 percent target ceiling. Analysts polled by Reuters on October 3 subsequently raised their expectations for Mexican inflation this year and next.