Title: Mexican Peso Strengthens Against US Dollar, Breaking Records in 2023
Subtitle: “Superpeso” trend expected to change amid potential interest rate increase by Banxico
In a surprising turn of events, the Mexican peso has been experiencing a winning streak against the US dollar since mid-2022. However, it is in the second half of 2023 that the currency has reached its highest levels not seen since 2016, breaking the barrier of 17 units for a greenback.
The strength of the Mexican currency, colloquially referred to as the “superpeso,” can largely be attributed to the decisions made by the Bank of Mexico (Banxico) regarding reference rates. These decisions have not only increased the currency’s attractiveness to investors but also contributed to the stability achieved in public finances and remittances this year.
This favorable condition has led the Mexican government to predict that the record for remittances in 2022 ($58.5 billion) could be surpassed, highlighting the positive impact on the country’s economy. Moreover, the strength of the Mexican peso against the US dollar is seen as good news, as it also aids in reducing the amount of foreign debt, which is primarily denominated in dollars.
Financial analysts, however, caution that the “superpeso” trend may change soon. While the United States Federal Reserve contemplates two interest rate increases, Banxico intends to maintain rates. If the US rates increase as expected, this could lead to a reversal in the currency’s appreciation, potentially bringing it back to around 19 pesos per dollar.
The Mexican peso holds a significant position in the global foreign exchange market. It is the fifteenth most traded currency worldwide, the most traded in Latin America, and ranks third on the continent, following the US and Canadian dollars.
Historically, the Mexican peso has played a pivotal role in currency symbolism. It was the first currency in the world to use the ‘$’ sign, later adopted by the United States for the dollar. The abbreviation ‘MXN’ is now commonly used to refer to the Mexican peso, replaced in 1993 to replace the previous ‘MXP’ initials.
In terms of denominations, semicircular-shaped coins, featuring the national coat of arms on the reverse, are widely used in Mexico, with 1, 5, 10, and 20 peso denominations. Additionally, there are bills of 20, 50, 100, 200, 500, and 1,000 pesos, facilitating day-to-day transactions.
In conclusion, the Mexican peso has defied expectations, outperforming many other currencies in a challenging international landscape. With a remarkable 4.87% appreciation against the US dollar in 2022, the currency closed the year at $19.50 pesos per dollar, marking its best annual performance in a decade, according to the Bank of Mexico (Banxico). While uncertainties remain, the “superpeso” trend has brought positive economic developments for Mexico, although potential interest rate changes in the near future could impact its strength.