Background on the Mexican Peso and its Recent Performance
The Mexican peso has experienced its second consecutive month of appreciation against the US dollar, with September marking its highest monthly appreciation since June. This growth was driven by policy decisions from both the Banco de México (Banxico) and the US Federal Reserve (Fed).
Key Figures and Rankings
- The Mexican peso closed at 18.3147 per dollar, a 0.28% or 5.19 centavo increase on Tuesday compared to the previous Banxico data.
- In September, it ranked among the top five most appreciated currencies, with a 1.86% gain, trailing only the South African rand (2.36%) and Brazilian real (2.86%).
- From July to September, the peso gained 2.40% against the dollar, and it has appreciated by 12.29% year-to-date.
- The US Dollar Index, which compares the US dollar to a basket of six currencies, rose 0.04% to 97.86 points on Tuesday and increased by 0.60% in September.
Expert Analysis and Factors Influencing Peso’s Performance
Felipe Mendoza, a financial markets analyst at ATFX LATAM, explained that the peso consolidated its strength against the dollar in September, influenced by both domestic and international factors.
- Banxico’s Interest Rate Cut: Banxico reduced its benchmark interest rate by 25 basis points to 7.50%, a move that was already anticipated and presented as calibrated and conditional.
- Fed’s Interest Rate Reduction: The Fed also cut interest rates by 25 basis points, with a less aggressive tone than expected and projections focusing on labor market developments and inflation.
Mendoza further elaborated that this dynamic weakened the US dollar and reopened interest in carry trade opportunities for the peso. However, long-term US interest rates rebounded towards the end of the period, limiting further gains.
Market Expectations and Future Outlook
The market anticipates that the Fed will continue reducing interest rates in the coming months, which is expected to keep the US dollar weak. Consequently, the Mexican peso may continue its appreciation trend against the greenback.
Key Questions and Answers
- What factors contributed to the Mexican peso’s appreciation? The peso’s growth was driven by policy decisions from Banxico and the Fed, including interest rate cuts and less aggressive stances on monetary policy.
- How has the Mexican peso performed compared to other currencies? The peso ranked among the top five most appreciated currencies in September, with a 1.86% gain, trailing only the South African rand and Brazilian real.
- What are market expectations for the US dollar? The market expects the Fed to continue reducing interest rates, which may keep the US dollar weak in the near future.
