Mexican Peso Edges Higher, Closes the Week on a Positive Note

Investors are gearing up for a pivotal week ahead, with monetary policy decisions from both the U.S. Federal Reserve and the Bank of Mexico (Banxico) on the horizon.

The Mexican peso gained ground against the dollar on Friday, rebounding after a local holiday and closing the week with a positive balance. The exchange rate ended the session at 20.1281 pesos per dollar, compared to the previous day’s reference of 20.2052 pesos. This marks a gain of 7.71 cents, equivalent to a 0.38% increase.

Throughout the day, the dollar traded in a range between a high of 20.2647 and a low of 20.1099 USD/MXN. Meanwhile, the U.S. Dollar Index (DXY), which measures the dollar’s performance against a basket of six major currencies, saw a marginal increase of 0.04% to 107.00 points.

USD/MXN

The peso’s recovery was supported by a slight retreat in the dollar and market reactions to weaker-than-expected local industrial production data, which bolstered expectations for a potential interest rate cut by Banxico.

Key Monetary Policy Decisions Ahead

The U.S. Federal Reserve is set to announce its monetary policy decision on Wednesday following its two-day meeting. According to CME Group’s FedWatch tool, there is a 97.1% probability of a 25 basis point rate cut, shifting market focus to the post-meeting statement for guidance.

Banxico is expected to follow suit on Thursday, with a high likelihood of a rate cut as well. “Inflation is easing, there’s no doubt about it. This has allowed central banks to focus on growth risks,” said Renato Campos of Squared Financial.

Weekly Performance

For the week, the peso showed resilience, recording a modest gain. Compared to last Friday’s close of 20.1793, today’s level reflects a weekly gain of 5.12 cents, or 0.25%.

The dollar-peso exchange rate has been trending downward in recent weeks, with support appearing to form around the 20.10 level.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.