Title: Private Sector Financial Analysts Lower Expectations for Mexican Peso Against US Dollar
By Julio Sanchez Onofre
After a strong performance in the first half of 2023, private sector financial analysts have revised their expectations for the exchange rate of the Mexican peso against the US dollar. According to a survey conducted by the Bank of Mexico (Banxico), experts now anticipate a lower average exchange rate of 17.42 pesos per dollar in July.
This forecast marks a decrease of 73 cents from the previous estimate of 18.15 pesos in May. However, it still represents a slight increase of 20 cents compared to the June average of 17.22 pesos.
According to Jorge Gordillo Arias, director of Economic and Stock Market Analysis at CIBanco, the potential for the Mexican peso to break down to 17.00 spot against the dollar in July will depend on how the Federal Reserve’s stance affects market behavior. He also stated that any pressure on the Mexican currency would likely be limited and temporary.
CIBanco projects a price range of 16.90 to 17.35 pesos per dollar for July. Looking ahead, analysts participating in the Banxico survey predict that the monthly average price of the dollar will remain below 18.00 pesos until October. By that time, the exchange rate is expected to reach 17.98 pesos.
Forecasts for November envision a monthly average of 18.16 units, with a year-end closing of 18.33 pesos per dollar. However, some analysts suggest that the dollar could even trade at 16.70 pesos by the end of 2023.
This updated outlook contrasts with the previous survey from May, where analysts projected the dollar to be above 18.00 pesos by July and reaching a closing rate of 18.96 by year-end. Now, financial analysts anticipate a return to trading levels of 19.00 pesos per dollar.
The Banxico survey results indicate that experts foresee the exchange rate returning to a monthly average of 19.00 pesos in June 2024. In contrast to the earlier estimate of February 2024, this reflects a delay in the dollar’s return to 19.00 pesos.
Furthermore, analysts now predict that the exchange rate will end 2024 at a level of 19.30 units, which is 66 cents below the May forecast.
Regarding the possibility of the dollar reaching 20.00 pesos per dollar, analysts currently rule out this scenario until at least the end of 2025. The survey consensus places the exchange rate at 19.80 pesos per dollar by the end of 2025, slightly below the 20.10 expectation in May.
While some analysts estimate the exchange rate to be as low as 18.00 units by the end of 2025, others suggest it could reach as high as 22.00 units.
These revised expectations reflect the evolving dynamics of the Mexican peso against the US dollar, highlighting the potential factors that may influence its future performance in the coming years.