The Mexican peso continues its strong performance, reaching its highest level in over eight years, since December 2015. The currency has shown gains against the US dollar for two consecutive months, with an appreciation of 2.3 percent in the month, according to data from the Bank of Mexico.
Analysts attribute the peso’s strength to factors such as foreign currency flows through remittances and exports, as well as the interest rate differential. Despite a cut in the Bank of Mexico’s reference rate, the peso remains resilient.
Luis Gonzali, from Franklin Templeton Mexico, highlighted the global factors influencing the peso-dollar exchange rate. He mentioned stability in the dollar, nearshoring trends, and the carry trade as supporting the peso’s strength.
However, Pamela Díaz Loubet of BNP Paribas warned of potential negative impacts of the strong peso on exports and remittances. She noted that while an appreciating peso may help inflation, it could also hinder economic competitiveness.
Looking ahead, the movements of the peso will continue to be influenced by monetary measures by both Banxico and the Federal Reserve. The interest rate differential between the two institutions will play a crucial role in determining the peso’s future trajectory.
Despite the peso’s gains, it has outperformed most major global currencies. Of the 68 currencies tracked by Banxico, 64 have appreciated against the peso in the last 12 months. The Argentine peso, Nigerian naira, Turkish lira, and Venezuelan bolívar are among the currencies that have lost value against the Mexican peso.
Overall, the Mexican peso’s strength has been notable this year, outperforming currencies of major developed countries such as the Japanese yen, Swiss franc, and Canadian dollar. Investors will be closely watching for further developments in the coming months to gauge the peso’s trajectory.