Background on the Mexican Peso and Banxico
The Mexican peso experienced a two-day winning streak, reaching its best level of the year. However, it started to weaken against the dollar on Thursday due to weak U.S. economic indicators and the policy decision made by the Banco de México (Banxico).
Key Factors Influencing the Peso’s Movement
- Weak U.S. Economic Indicators: Recent economic data from the United States signaled a slowdown, causing investors to seek safer assets and reducing risk appetite towards Mexico.
- Banxico’s Policy Decision: Banxico unanimously decided to lower the interest rate by 50 basis points, which led to the Mexican interbank fund rate dropping to its lowest level since 2022 at 8.5%.
- Global Currency Performance: Among major currencies, the Mexican peso was the second-most depreciated against the dollar, with other currencies like the South African rand, Swiss franc, Japanese yen, Russian ruble, and Singapore dollar also experiencing declines.
Experts’ Analysis and Impact on the Market
Gabriela Siller, director of economic-financial analysis at Banco Base, explained that the peso’s depreciation was due to increased risk aversion towards Mexico following weak U.S. economic indicators and Banxico’s interest rate cut.
Jorge Gordillo, director of economic and stock market analysis at CI Banco, noted that the peso’s positive streak ended due to profit-taking and the absorption of Banxico’s latest decision. Additionally, factors like the implementation of tariff reductions between China and the U.S., as well as the situation with Iran, played a role.
Impact on Other Currencies
Among the major currencies, the Brazilian real appreciated the most at 0.73%, followed by the Mexican peso (0.59%), Argentine peso (0.58%), Colombian peso (0.46%), and the Peruvian sol (0.38%).
Key Questions and Answers
- Q: Why did the Mexican peso weaken against the dollar?
A: The peso weakened due to a combination of factors, including weak U.S. economic indicators that reduced risk appetite towards Mexico and Banxico’s decision to lower the interest rate by 50 basis points.
- Q: How did other major currencies perform alongside the Mexican peso?
A: Among major currencies, the Mexican peso was the second-most depreciated against the dollar. Other currencies like the South African rand, Swiss franc, Japanese yen, Russian ruble, and Singapore dollar also experienced declines.
- Q: What role did global factors play in the Mexican peso’s movement?
A: Global factors, such as the implementation of tariff reductions between China and the U.S., as well as the situation with Iran, contributed to the Mexican peso’s weakening alongside other currencies.
