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  • Writer's pictureSieracki Milosz

The Mexican Peso: Resilience and Challenges | USD/MXN Analysis

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In recent times, the Mexican Peso (MXN) has faced its fair share of challenges, from economic budget projections to global market forces. Despite this, the MXN has shown resilience, bouncing back from setbacks and capturing the attention of traders worldwide. In this article, we delve into the factors affecting the Mexican Peso's performance, the looming Banxico decision, and the impact of nearshoring and interest rate differentials between Mexico and the US on the USD/MXN exchange rate.

The Rollercoaster Ride

The Week of Turmoil

The Mexican Peso took a hit, losing nearly 3.50% in a single week due to risk aversion and the hawkish rhetoric of the Federal Reserve. With the possibility of another rate hike in 2023, the MXN hit a four-month low at 17.8161 against the US Dollar. However, a glimmer of hope emerged with the upcoming decision by the Bank of Mexico (Banxico).

Mexico's Economic Resilience

Despite the challenges, the Mexican economy remains robust, benefiting from nearshoring opportunities following the COVID-19 pandemic. However, it's important to note that the country's inflation, though "stable," hovers around 4.64% YoY in August, slightly above Banxico's goal of 3% plus or minus 1%. The recent economic budget for 2024, projecting a deficit increase to 4.9%, has raised concerns and sparked speculations regarding Banxico's stance on this proposal.

Banxico's Role

The Bank of Mexico plays a pivotal role in the Mexican Peso's performance. It is expected to maintain a restrictive monetary policy and keep rates unchanged at 11.25%. The central bank's decision will undoubtedly have a ripple effect on the currency market and influence the USD/MXN pair.

Factors at Play

Several factors are at play when it comes to the MXN's performance:

  1. Risk Aversion: Being an emerging market currency, the Mexican Peso is vulnerable to risk aversion. News of a possible US government shutdown triggered a flight to safe-haven assets, weakening the MXN.

  2. Oil Prices: The Mexican economy relies heavily on crude exports, and any drop in oil prices can weaken the national currency.

  3. Moody's Warning: Moody's rating agency has cautioned that the fiscal strategy of the Mexican government in 2024 must be credible. While they lowered Mexico's rating to "Baa2" with a "stable" outlook in July, fiscal pressures loom large due to the 2024 economic budget.

  4. US Treasury Bond Yields: The Mexican Peso's strength is inversely related to US Treasury bond yields. When yields rise, the MXN weakens. The recent decision by the Federal Reserve to hold rates steady, with the possibility of rates going above 5% in 2024, has had an impact on the MXN.

Technical Analysis

Charting the Path Ahead

The Mexican Peso initially depreciated to 17.8161 against the US Dollar but is now stabilizing near the 200-day Simple Moving Average (SMA) at 17.8410. Despite recent setbacks, the MXN is showing signs of resilience, and further upside movement is expected. The Relative Strength Index (RSI) suggests a potential pullback in the near term, but the overall uptrend remains intact.

USD MXN on BlackBull Market / Price 29-09-2023


The Mexican Peso's journey in 2024 is marked by challenges and opportunities. While risk aversion and global market forces pose significant hurdles, Mexico's economic resilience and Banxico's decisions could pave the way for a more favorable outlook. Traders worldwide are closely monitoring the USD/MXN pair, awaiting signals that will shape their strategies in the coming months.

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  1. What is the current exchange rate for USD/MXN? The exchange rate for USD/MXN can vary daily, so it's essential to check a reliable financial news source for the most up-to-date rates.

  2. How does Banxico influence the Mexican Peso's value? Banxico, the Bank of Mexico, plays a crucial role in setting monetary policy and interest rates, which can significantly impact the MXN's performance.

  3. Why is Mexico's economic budget for 2024 causing concerns? The budget for 2024 has raised concerns because it projects an increase in the deficit, which may have implications for the country's fiscal health.

  4. What are the key factors to watch for in the Mexican Peso's performance? Keep an eye on factors like risk aversion, oil prices, US Treasury bond yields, and Banxico's decisions for insights into the MXN's performance.

  5. How can traders navigate the challenges in the USD/MXN pair? Traders should stay informed about economic developments, central bank decisions, and global market trends to make informed decisions in the forex market.

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