The Mexican peso reached levels near 18 pesos per dollar this week, a floor not seen since July 2024, driven by a weak dollar and solid economic fundamentals. Analysts highlight a 15.6 percent appreciation in 2025, though they warn this strength may be temporary due to rate cuts and trade tensions.
This week, the Mexican peso's exchange rate neared 18 pesos per dollar on Thursday and briefly broke it on Friday in international operations, a level not seen since late July 2024. According to Bloomberg data, in 2025 the peso has accumulated a 15.6 percent appreciation, surpassed only by the Russian ruble (42.1 percent), Hungarian forint (21.1 percent), Czech koruna (17.7 percent), and Colombian peso (15.9 percent). Since June, it has strengthened 7.9 percent, ranking as the third most appreciated currency after the Colombian peso (9.5 percent) and Hungarian forint (8.4 percent).
The Bank of Mexico (Banxico) attributes this performance to Mexico's favorable position in U.S. trade tensions, a weak dollar, and low volatility levels that favor carry trade strategies, driven by interest rate differentials. Banxico cut its benchmark rate to 7.0 percent, keeping it attractive for capital compared to the U.S. Federal Reserve's 3.50-3.75 percent, which lowered by 25 basis points on December 10.
Solid macroeconomic fundamentals support the peso: foreign direct investment (FDI) reached 40.9 billion dollars in the third quarter, a historical record. Total exports summed 66.1 billion dollars in October, the highest monthly figure recorded, with a 34.8 percent year-over-year increase in non-automotive manufacturing. To the United States, exports were 44.6 billion in September (monthly record) and 399.5 billion from January to September (cumulative record). Remittances reached 62 billion dollars in the last 12 months through October.
However, a strong peso has pros and cons. Enrique Quintana of El Financiero notes it acts as an 'automatic discount' on imports like gasoline, inputs, and gadgets, but hurts remittance recipients whose dollars buy less, and hampers exports and tourism by reducing earnings. Víctor Piz warns that levels below 18 pesos are unsustainable amid contracting rate differentials, geopolitical tensions, the T-MEC review in 2026, and Mexico's low economic growth. Quintana forecasts the appreciation as temporary, with a possible rebound to 18.30-18.80 if U.S. inflation rises more than expected.
