The peso seems headed for a very positive week after rising to a yearly high in overnight trading before halting its advance when the markets opened on Friday.

Mexico’s currency appreciated against the U.S. dollar for a fifth consecutive day, hitting 18.43 to the dollar to mark a new year-to-date high and reaching levels not seen since July 26, 2024.

The peso gave back some of its gains in early trading on Friday, slipping to 18.49 to the dollar, before strengthening later in the early afternoon. Analysts at Banco Base attributed the morning depreciation to a correction after the peso appreciated during five consecutive sessions and gained 1.47% against the dollar.

According to global financial data company Trading Economics, the peso strengthened “as the greenback remained subdued, driven by weaker US labor data and lower Treasury yields, while Mexico’s own inflation profile remained contained.”

Mexico’s headline inflation slowed slightly to 3.57% in August, in line with expectations, while core inflation held steady at 4.23%. The data reinforced expectations that the cautious monetary easing cycle being followed by Mexico’s central bank (Banxico) will continue at a measured pace. 

In a social media post, Gabriela Siller, director of economic analysis at Grupo Financiero Base, attributed the peso’s renewed strength to investors’ optimism ahead of the upcoming U.S. Federal Reserve Board meeting. 

In her post, Siller wrote that the new yearly low of 18.49 for the number of pesos needed to buy a dollar can be attributed to “the expectation the Fed will cut its rate on Sept. 17.” 

At the same time, Banxico’s recently upgraded growth projections, boosting its 2025 GDP forecast to 0.6% and 2026 to 1.1%, signaled a belief in the resilience of the economy. 

Tracking the bullish trend demonstrated by the peso, the Mexican Stock Exchange (Bolsa) hit new historic highs this week.

The Bolsa, which has performed well this year, hit a record high of 61,886.12 on Thursday, surpassing the previous record of 61,522.63 points set on Wednesday, which in turn surpassed the record set only two days earlier.

The Bolsa gained 3.02% last week and was up 23.57% at close on Thursday.

With reports from El Economista, El Universal, Infobae and El Financiero