From Chuck Butler, our Friend at EverBank

What's Happening: On Friday, the seven major currencies were all pretty stagnant. The reason being: We didn't have any major losses print, or we didn't have any news about all the rot on the U.S. economy's vine. Instead, the biggest mover in the currency world was...(drum roll please) the Mexican peso! Yes, the peso - once the joke of major currencies - outperformed all other currencies last week. In fact, the peso just hit a 5-year high vs. the dollar after the Mexican Central Bank raised interest rates 1/4% (25 BPS) to 8%. This marks the peso's highest level vs. the dollar since 2003.

What I Say: I've always said the one thing that's wrong with the peso is it doesn't pay an "insurance premium." Look back to the turn of the century, and the peso was outperforming most currencies. Why? It's simple: Interest rates were greater than 10%, so there was an "insurance premium" paid on the peso! What, did the peso need an insurance premium? Well, for starters the Mexicans just moved the decimal in the peso price, in the mid-90's. In other words, it's a banana republic folks, and if you are going to invest there, you need a higher interest rate (insurance premium) to help protect you from the volatility. I personally, don't think the interest rate is high enough in pesos, yet. But I see what investors are doing. They are buying at cheaper levels in anticipation of higher rates. What this also indicates to me is a renewed interest by investors to take risks. That risk taking can also be seen in a stronger Brazilian real, and a weaker Japanese yen. In my opinion, all this risk-taking is NOT warranted yet, not with all the "risk events" ready to break on the scene at a moment's notice! Of course, that's just me...