Background on the Mexican Peso and Its Recent Performance
The Mexican peso has appreciated for the fifth consecutive week against the US dollar, closing at 17.8930 pesos per dollar with a gain of 0.27% or 4.88 centavos, according to data from Banco de México (Banxico). Over the past week, the peso has appreciated 0.59%, marking its fifth week of gains against the greenback, accumulating a 3.20% increase. In 2025, the Mexican peso has shown an appreciation of 14.32%.
Market Factors Driving Peso’s Appreciation
The relative stability of Mexican local markets is attributed to the expectation that the US Federal Reserve may continue reducing interest rates in the coming year, while Banco de México (Banxico) is expected to pause its monetary easing cycle.
Felipe Mendoza, CEO of investment management firm IMB Capital Quants, stated that “the peso is strong but also near zones where the market usually takes profits.” He added that “for the coming days, the base scenario is consolidation with a sideways bias, a fluctuating exchange rate moving within ranges, amplified by low liquidity towards the end of the year.”
Gabriela Siller Pagaza, Director of Financial Analysis at Banco Base, explained that the weekly appreciation of the peso occurred alongside a decline in the US dollar and expectations of further rate cuts by the Fed. She noted that “the expectation is that the Federal Reserve will maintain a flexible monetary policy in 2026, with liquidity injections and interest rate reductions. In the past week, several negative indicators were released in the United States.”
Another factor contributing to the dollar’s weakness, according to Siller, is the liquidity injections announced by the Federal Reserve at a rate of $40 billion per month, aiming to stabilize the repo market. Siller anticipates that the peso may continue appreciating, potentially reaching 17.65 pesos per dollar during the first quarter of 2026.
Investor Uncertainty Surrounding Peso’s Future Appreciation
Investors in Chicago are uncertain about whether the peso will continue appreciating against the US dollar, a sentiment reflected in their speculative positions favoring the Mexican currency last week.
According to recent data, net speculative positions favoring the Mexican peso, as reported by the Commodity Futures Trading Commission (CFTC), stood at over 87,100 contracts last week—a decrease of 19,900 contracts compared to the previous week (equivalent to an 18.59% reduction).
Key Questions and Answers
- Q: Why has the Mexican peso appreciated for five consecutive weeks? A: The peso’s appreciation is driven by expectations of continued US Federal Reserve interest rate cuts and Banco de México’s pause in its monetary easing cycle.
- Q: What factors contribute to the US dollar’s weakness? A: The Federal Reserve’s liquidity injections and a series of negative economic indicators released in the United States have contributed to the dollar’s weakness.
- Q: What are investors’ concerns regarding the Mexican peso’s future appreciation? A: Investors are uncertain if the peso will maintain its upward trajectory against the US dollar, as reflected in their speculative positions.
