The Mexican peso extended its winning streak to seven days in Friday morning trading, appreciating to 17.28 to the US dollar before weakening slightly.
Bloomberg data shows that the peso closed at 18.32 to the dollar on Oct. 25 before strengthening every weekday since then.
Shortly after 1 p.m. on Friday, the USD:MXN exchange rate was 17.44.
The peso’s appreciation to 17.28 represented a gain of 1.3% compared to its closing position on Thursday and an advance of 4.8% this week. The cumulative appreciation from the seven-day winning streak was about 6%.
The peso’s strengthening on Friday morning came after data out of the United States showed that job growth slowed more than expected in October. Data from the Bureau of Labor Statistics showed that U.S. employers added 150,000 jobs last month, 30,000 fewer than the number expected by economists. The figure for September was 297,000.
The latest data increases the likelihood that the U.S. Federal Reserve will leave interest rates unchanged after its December monetary policy meeting.
The peso has benefited this year from the broad gap between the Bank of Mexico’s benchmark interest rate – currently 11.25% – and the Fed’s federal funds rate, which is set at a range of 5.25%-5.5%.
The peso made gains earlier this week due to a reduced aversion to risk and after the Fed announced on Wednesday that it was holding its funds rate steady. The peso has appreciated by around 12% this year after starting 2023 at about 19.5 to the dollar.
At his Friday morning press conference, President López Obrador described the currency as a “super peso” and “very strong.”
“This helps us. There are some disadvantages but there are more advantages,” he said.
“… The [state of the] economy has a lot to do with confidence so when a country has good macroeconomic numbers it’s a country with advantages because it attracts investment,” López Obrador said.
“It helps a lot if there is no devaluation, inflation is under control, there is no over-indebtedness and there is [economic] growth,” he said.
“And Mexico now has a very good reputation for public investment and a lot of foreign investment is coming in,” López Obrador added.
With reports from Reuters
A strong peso makes it more difficult for other countries to purchase Mexican goods.
It also makes it harder for Mexicans to send remittances to their families from abroad.
It makes it harder for tourists to visit Mexico.
Tourism + Remittances account for about 12% of the economy. Exports + the other two accounts for over 50% of the economy. Imports are closer to 40%.
It’s really not clear that a “super peso” is something to chase. If the peso achieved parity (1:1) with the dollar or Euro, the economy would collapse.
I’m not saying that Mexico shouldn’t want a good peso, but generally speaking the most important thing is to have a stable currency over a highly-valued one. Fluctuations are not good for anyone.
There are challenges with a rapid change in currency however overall it is better for Mexicans when the peso appreciates. It appreciates because of Billions of new dollars/euros/ yuan/yen of foreign investment. These Billions spent in Mexico mean better wages and more tax revenue for schools, roads and hospitals.
Expats worried about a rising peso should use money from their home currency to buy Mexican bonds.
With rising investment in Mexico maybe someday the Mexicans in Mexico will send money to help their family in the USA. 🙂
It’s great to see the increase in foreign manufacturing investment in Mexico when it’s good for jobs supporting the countries under the new NAFTA et. al. in our neck of the world. Near-shoring especially helps offset the mega crisis created when distant foreign supplies countries couldn’t ship due to the global COVID-19 pandemic.
But I hope that AMALO doesn’t forget that a bunch of the Mexican economy is based on U.S./Canadian dollars flowing down here to individual Mexican family members. Those dollars are generating fewer pesos to help these families maintain a reasonable quality of life and standard of living in the midst of Mexico’s inflation issues.
I just hope that AMLO can find a reasonable balance for all concerned.
Huh, the more pesos the dollar buys the LESS valuable the peso. Bring back 20, baby!
Your reporting still has it wrong in reverse.
Hi Robert,
I’m not sure what you’re referring to here. As the article says, 1 US dollar was worth 18.32 pesos on Oct. 25. On the morning of Nov. 3, on the seventh day of a winning streak for the peso, the dollar was trading at 17.28 pesos. Thus the USD depreciated and the MXN appreciated in that period.
Thanks for reading.
Peter Davies
This trend has been cyclical for a long time. Same type of story was published weeks ago and then peso was back over 18. Hardly a súper peso. Presidential hype. It seems to my following the rise and fall that currently the US stock market that I’d market is down and peso goes up. Lots of factors in play. When we moved to Mexico 16 years ago pesos was at 10 to one. It also seems Mexico has oil, tourism and remittances as biggest sectors and now other markets are developing
The only thing contributing to the strong peso and new investment in Mexico is the geographical border it shares with the USA. All this economical and investment activity is based on geopolitical events going on around the world right now and if AMLO or future governments can keep from screwing it up, which they have a historical habit of doing, there might be a few good years of growth opportunity here for Mexico and that’s a very good thing!!!
Oil, higher interest rate, continued Foreign Investment seems to have helped the peso increase in value.
It’s always concerning when a president (in any country) takes too much credit for economic indicators – be it the stock market, job numbers, or a strong currency.
or, on the contrary, is blamed or made a scapegoat for all sorts of problems they have absolutely no control over
The short term fluctuation is very much connected to the currency trading market. When foreign currency investors can get a much higher interest rate by investing in Pesos the “value” of the Peso rises and vice versa. However, what is the detrimental effect of an 11% interest rate on Mexican individuals/businesses borrowing? I think there is now a fledgling mortgage financing business in Mexico but you can imagine what an 11% interest rate (in the US) would do to the US housing market? Just look to the Carter years of double digit borrowing costs.
Just to clarify, it’s the differential between the interest rate and the rate of inflation that traders look at (among other things of course) and what’s making MXN more attractive than USD.
Lots of good points made here. I would add that the Bank of Mexico’s next monetary policy statement is due out Thursday Nov 9. Check here for the calendar of Bank statements:
https://www.banxico.org.mx/monetary-policy/d/%7B0C35369C-BF8F-E5A8-7710-FD5A6716474F%7D.pdf
This should give some clues on whether and when the Bank will soften its restrictive monetary response to inflation expectations going forward. So far, it shows no hint it might lower is federal rate from the current 11.25% (vs 5-5.5% US).
IMO, I don’t see any reason for the Bank of Mexico to change its posture so I would expect the Peso will remain relatively strong, within the range of 16.5 to 18.5 Pesos to USD for many months to come. I recognize that many factors affect the exchange rate, but it’s an important consideration.
There has been no “SAVINGS” on local goods for the locals, just brings less people to spend money here.
The economic sword is slashing me as a snowbird. I will survive.
The beach massage 2 years ago 300 pesos ($15.75) is now 400 pesos (24.25). Still a bargain, but not amazing..
The same with breakfast…was $7, now $11. Dampens the experience.
I was here in late 80s and one day the rate was 850:1usd. Just a week later it was 1100 pesos to $1. We were rich!!
Beer was $10 a case with $5 back for the bottles…..
Eventually they dropped 3 zeros for the new peso. Interest rates were 32%.
How things change….