The “super peso” is most definitely back.
The Mexican peso appreciated on Wednesday morning to reach 16.66 to the US dollar, its strongest position since July 2023.
By 1 p.m. Mexico City time, the peso had weakened slightly to trade at 16.68 to the greenback, according to Bloomberg but recovered to 16.67 by the close of the trading day.
While the peso reached a high of 16.62 last year, the USD:MXN exchange rate at the end of a trading day hasn’t been below the 16.66 level seen this morning since December 2015.
The peso has had a good month, appreciating by around 2.3% after closing at 17.05 to the dollar on Feb. 29.
On Tuesday, the currency was trading at 16.80 to the greenback at the close of markets, meaning that it appreciated just over 0.8% to reach 16.66 on Wednesday morning.
The El Financiero newspaper noted that the appreciation of the peso on Wednesday occurred as investors continue to bet that the United States Federal Reserve will cut its benchmark interest rate from the current 5.25%-5.5% range at some stage this year.
The peso has benefited from the wide difference between the Fed’s key interest rate and that of the Bank of Mexico (Banxico), which has remained at 11.25% since it was raised to that level in March 2023.
Mexico’s central bank is also expected to cut interest rates this year, possibly even as soon as next week after its board holds its monetary policy meeting on March 21. A cut in the U.S. before one in Mexico would likely benefit the peso, whereas the peso would probably weaken if Banxico moves first.
Inflation in Mexico remains above Banxico’s 3% target, but the headline rate did decline in February to reach 4.40% after increasing in the final two months of 2023 and in January.
Inflation in the U.S. ticked up to 3.2% last month from 3.1% in January.
Many analysts forecast in late 2023 that the peso would weaken this year after it appreciated around 13% against the dollar last year. But so far that hasn’t been the case. The currency was trading at just above 17 to the dollar at the start of January.
Beyond the Mexico-United States interest rate differential, other factors that benefited the peso in 2023 and have continued to do so in early 2024 include record-high incoming flows of remittances and strong foreign investment.
With reports from Radio Fórmula and El Financiero
It would be interesting to hear from your other subscribers if/how the 16.67 USDMXN and 12.38 CADMXN is affecting them?
For me, I still feel like I live for free when I’m in Mexico. Of course it helps if your house and big ticket items are paid for.
Hard for me to complain personally and likely for the average expat. However, Mexican friends complain about the significant increase of prices for food and services. We face that same inflation at the same time our purchasing power is declining.
I absolutely concur. Everytime that I deposit my US Social Security check and see the declining conversion rate I cringe; but as you so accurately commented, without the high priced items like a house mortgage and no auto payments, the day to day is very economical for us.
It is going to cost us about an extra $31k for our house 😥😥
Hi Marc, my general guideline is if you are spending over $400k for a Mexico home and a monthly budget of $3000 I wouldn’t come to Mexico now. You can live like that in a beautiful 55 plus community in Southern California and have a Mercedes and Harley. In Mexico you can’t have nice things except a big house. If it’s a second home in Mexico obviously that’s a different story.
You aren’t going to touch what you can get for $400k in Mexico, in Cali. Where? Bakersfield?
The peso/dollar exchange rate mainly affects gringos, who are a very small % of the population. Its main impact is on new construction for gringos and Canadians building homes. However it really affects the Mexican population. The high interest rates on the government bonds is being financed by PEMEX, which is where the vast majority of government income comes from. This, then translates into higher gas prices, needed to pay the interest on the bonds. Which then creates more inflation, not less, for Mexicans. Transportation costs affect every part of the economy. These high interest rates are not sustainable and are not needed. Hopefully the new president will adjust them to a more reasonable level.
How ridiculous to say that people can’t have nice things in Mexico!
Yes, you can buy Mercedes Benz and Harley’s if you can afford them. And you can’t have a house in Southern California for 400K unless is in a trailer park.
Hi Isabel. Of course I am talking about the infrastructure, bad roads, narrow lanes, small parking spots and speed bumps (topes) everywhere. Obviously you can buy Harleys and Mercedes but they are useless. What I tell people is that in Mexico you get the 5000 sq ft house but not the entire package. I also suggest that anyone considering Mexico be adaptable. For example I have a few motorcycles at my Mexico house but they are not Harleys. I still ride everyday and it is a lot of fun.
A lot of beautiful homes in the $400k range in gated 55plus communities in the Los Angeles area of Southern California. If you don’t want to be in California you can go to Florida or Texas for much less. That’s not my thing but some seem to like it.