(Adds with peso reaction to Fed announcement)
MEXICO CITY, Sept 21 Mexico's peso briefly
strengthened on Wednesday after the U.S. Federal Reserve left
interest rates unchanged but strongly signaled it could still
tighten monetary policy by the end of this year as the labor
market improves further.
The peso strengthened 0.6 percent to 19.7 pesos per dollar
on the announcement, but reversed gains soon after.
Earlier on Wednesday, Mexico's finance minister said in a TV
interview he expected the Fed's decision to have some impact on
the peso, which has weakened nearly 15 percent against the
dollar this year.
Jose Antonio Meade said there is no decision yet on whether
the government will intervene to stem the currency's slide, but
that there would be a meeting next week to evaluate it.
Mexico is committed to a freely floating exchange rate and
generally refrains from more direct forms of intervention used
by other emerging markets.
The country's FX commission, made up of officials from the
central bank and the finance ministry, began using rules-based
auctions in late 2014, when a collapse in global oil prices sent
the peso to a record low.
In February, however, with the exchange rate around 19.5
pesos per dollar, the central bank sold dollars directly to the
market for the first time since 2009, abandoning the rules-based
auction regime that Mexican authorities said had become
predictable and exploited by market players.
Banamex said in an analyst note on Tuesday evening it now
expects the Bank of Mexico to raise rates next week by 75 basis
points as a result of the peso's recent depreciation.
The peso has weakened around 5 percent this month on
concerns that U.S. Republican candidate Donald Trump could win
the Nov. 8 presidential election after polls showed him gaining
ground against Democratic candidate Hillary Clinton.
(Reporting by Gabriel Stargardter and Veronica Gomez; Editing
by Meredith Mazzilli)