Mexican peso may see moderate depreciation against US dollar in coming months
The Mexican peso, which recently dropped below 18.00 units and even approached 17.00, is expected to see “relatively moderate” depreciation against the US dollar in the coming months, according to Alejandro Saldaña Brito, chief economist at Grupo Financiero Bx+.
The recent winning streak of the Mexican peso has been driven mainly by expectations that the United States Federal Reserve (Fed) will no longer raise interest rates and even start cutting rates as early as March next year due to the cooling of the US economy, particularly the labor market, and the decline in inflation.
Saldaña Brito cautioned that while markets are complacent with inflation expectations, central bankers have indicated that a couple of pieces of data are not enough to ensure that inflation is on its way to the goal.
The economist projected that the exchange rate could rebound by the end of the year and close 2023 above 18.00 units, less favorable compared to the consensus estimates of analysts who expect the price of the dollar to end the year at 17.86 Mexican pesos.
Looking ahead, the depreciation of the Mexican peso could accentuate by 2024, influenced by the start of interest rate cuts by the Bank of Mexico (Banxico) before the Fed, a possible global economic slowdown, and events such as the elections in Mexico and the United States.
“With this, the Bx+ economist estimated that the exchange rate will head towards levels of 19.00 pesos per dollar, or even a little higher, in 2024. Similarly, the consensus of analysts consulted by Citibanamex now projects the parity at 19.00 at the end of next year.”