The Mexican peso strengthened to 16.82 to the US dollar on Wednesday morning on the back of data that showed that annual inflation in the United States slowed to 3% in June, its lowest level in over two years.

It’s the second time in a week that the USD-MXN exchange rate has dipped below 17 after the greenback briefly went under that level last Wednesday.

According to data from the financial and media company Bloomberg, the 16.82 rate – the peso’s strongest position since December 2015 – was reached at 8 a.m. Mexico City time.

The peso had weakened slightly by 9 a.m. to trade at 16.83 to the dollar.

Gabriela Siller, director of economic analysis at the Mexican bank Banco Base, noted on Twitter that the peso strengthened following the publication of U.S. inflation data that showed a rate in June “below the expectations of the market.”

The decline in the inflation rate in the United States makes it less likely that the U.S. Federal Reserve will raise interest rates later this month. The dollar strengthened last week after positive private employment data in the U.S. raised expectations that the Fed would increase its interest rate from the current 5% to 5.25% range.

Analysts cite the Bank of Mexico’s high benchmark interest rate – currently 11.25% – and the significant difference between that rate and that of the Fed as one factor in the current strength of the peso. Strong incoming flows of foreign capital and remittances are among the other factors cited.

Mexico’s currency has appreciated significantly this year after starting 2023 at about 19.5 to the U.S. dollar.

President López Obrador has celebrated the success of the peso in 2023, and asserts that his government’s management of the economy is a major reason for the gains it has made.

When the greenback dipped below 17 last week, he said he was “very happy” because a stronger peso reduces public debt contracted in dollars.

With reports from El Financiero