The Mexican peso appreciated against the US dollar for a fifth consecutive day on Wednesday to reach its strongest position since January.
After closing at 16.95 to the greenback on Tuesday, the peso strengthened to 16.85 on Wednesday morning before weakening slightly. The USD:MXN exchange rate was 16.88 pesos to the US dollar at 3:30 p.m. Mexico City time, according to Bloomberg.
The 16.85 rate was the peso’s strongest position since Jan. 8 when the currency closed at 16.84 to the dollar.
The El Financiero newspaper reported that the expectation that the United States Federal Reserve will cut interest rates “later this year” as well as a weakening of the dollar “allowed the Mexican peso” to appreciate for a fifth consecutive day on Wednesday.
The USD:MXN exchange rate was 17.09 pesos to the US dollar at the close of markets last Wednesday, meaning that the peso has appreciated about 1.2% since then.
The Mexican peso benefited in 2023 from the significant difference between the Bank of Mexico’s benchmark interest rate — currently set at 11.25% — and that of the Fed (5.25-5.5%).
Mexico’s central bank is expected to make an initial cut to its record-high rate in the first half of 2024, but most analysts believe it will not undertake an aggressive rate-easing cycle this year, and thus monetary policy could continue to benefit the peso for some time yet.
Inflation declined steadily throughout most of last year but at 4.45% in the first half of February is still above the Bank of Mexico’s 3% target.
Buoyed also by strong incoming flows of remittances and foreign investment, the peso appreciated around 13% last year after trading at 19.5 to the dollar at the beginning of 2023.
The impressive performance resulted in the currency being dubbed the “super peso,” a nickname that has reappeared in more than a few headlines this week.
The median forecast of 20 foreign exchange strategists polled by Reuters between March 1 and 4 is that the peso will weaken to 18.24 to the greenback by this time next year. “Forecasts ranged from 15.50 to 19.00 per dollar,” the news agency reported.
With reports from El Financiero
Source: Mexico News Daily
