Mexican peso opens strongly against the dollar for the second week
Time to Read: 2 minuteThe Mexican peso maintains its winning streak against the United States dollar, opening the week with a slight gain compared to last week, when it already had broken the barrier of $17 pesos per dollar.
The Mexican peso opens strong for the second week consecutive, below $17 pesos for each dollar.
The previous week, the dollar added a setback when trading at $16.75 pesos per dollar, a similar figure with which it opened this Monday, something that has not surprised analysts, who recognize that the “super peso” is having a positive effect on the projections of the Mexican economy.
There are several factors that are considered to evaluate the behavior of a currency, therefore that in addition to the strength of the economy in Mexico, the high-interest rates in the United States are also considered.
In this sense, it is estimated that by the end of 2023, the peso will increase slightly; while in 2024, when the Federal Reserve could reduce interest rates, the Mexican currency will reach a price of just over $18 pesos per dollar.
“The rate differential leads to the appreciation of the peso, but I don't think that's the most important thing. Rather, I think it's the expectations that the Mexican economy can grow more,” said Gabriela Siller, head of analysis at Banco Base de México, according to a WSJ report.
Bank of America has insisted that the peso's recent gains are due to US interest rates.
“While the peso could remain strong in the short term thanks to the resilience of the United States, we believe that all risks are to the downside,” Bank of America Global Research said at the end of June.
Mexico is undergoing a major economic transformation, largely due to the so-called ‘nearshoring’ or business relocation,
It is estimated that the Mexican currency has appreciated 13% against the dollar in the last year, marking its best period for almost 10 years.
Mexican President Andres Manuel Lopez Obrador has highlighted the advance of the Mexican currency.
“This has not happened in decades,” he said a few days ago.
The behavior of the Mexican economy and the peso has been a blow to critics of López Obrador, whom they describe as “nationalist”, but who has promoted important investments in the country, such as the new plant from Tesla.
The Mexican Ministry of Economy reports that, during the first quarter of 2023, Foreign Direct Investment (FDI) was $18.636 million dollars, or 48% more than the quarter of the previous year.
The drop in the price of the dollar has, however, some negative effects, such as the need for immigrants to send more remittances to their families, as well as less interest in real estate investments in Mexico and greater caution even on vacation.
Some financial institutions, such as Swiss Bank, point out that it is difficult for the dollar to fall much more against the Mexican peso.