UBS Global Wealth Management managing director Alejo Czerwonko believes the Mexican peso will gain 4% on the US dollar in 2025, despite the currency weakening by 19% throughout 2024.
His reasoning? An improvement — not a worsening — of bilateral relations between Mexico and the United States.
Rejecting the prevailing pessimism about future relations between North American neighbors, Czerwonko told the newspaper Milenio that the mutually beneficial bilateral relationship is very strong and can’t be overlooked when predicting the future of the peso.
“Of course, Mexico benefits from the United States, but the reverse is also true,” Czerwonko said. “If Washington really wants to reduce its economic dependence on China, the relationship [with Mexico] is part of the solution.”
Czerwonko predicted that the peso — which opened Monday at 20.31 to the US dollar — will trade at 19.50 to the US dollar by the end of 2025. This is stronger than most projections, but still weaker than the 18.70 exchange rate that Mexico’s Finance Ministry (SHCP) anticipates in 2025.
The peso’s tumultuous year in review
The 19% hit the peso took this year was its worst since 2016 though the decline in international oil prices was primarily to blame then, according to Milenio.
In April, the peso reached a nine-year high of 16.30 to the dollar. Shortly after, the currency started to slip, grazing an exchange rate of 18 by June 3. President Sheinbaum’s election on June 2 created nervousness about a perceived upward trend in absolutism, sending the peso on a downfall that was made worse by the Morena party’s passage of a controversial judicial reform in September.
In recent months, the peso has hovered around 20 to the dollar, with December producing a depreciation of 0.46%.
The exchange rate winds shifted dramatically this month as both the Mexican and U.S. central banks lowered their benchmark interest rates, inflation decelerated in Mexico and U.S. political news ahead of Trump’s Jan. 20 inauguration emphasized potential conflicts.
Contrary to UBS, the news magazine Expansión cited analysts who see Mexico’s currency weakening to as much as 21 pesos to the US dollar.
Trump’s return to the White House, the uncertainty of the Mexico-U.S. relationship, broad geopolitical concerns and local fiscal policies are all expected to impact the peso in 2025, Expansión reported.
In contrast to SHCP’s bullish stance, Mexico’s central bank sees the peso finishing 2025 at 20.53 to the dollar. Other institutions surveyed by Expansión offered projections ranging from 18.5 by Banco Base to 21 by Monex Financial Group.
Citibank Mexico (20.5), Finamex Casa de Bolsa (20.9) and Rankia Investment Group (20.5) also foresee a slight weakening in the peso next year.
Banco Base analyst Gabriela Siller hedged on the bank’s positive projection, telling Expansión that if Trump does carry out his threat to slap tariffs on Mexican imports to the United States, the situation would become less certain.
With reports from Milenio, Expansión and ABC Noticias
I doubt there’ll be tariffs on a commodity the U.S. can’t produce.
What commodity is that?
Tequila?
Sufficient quantity of avocados, sandy worm beaches in Winter, lots of colorful good art.
Financial forecasts are rarely better than random guessing. Those who get it right are mostly lucky.
When you don’t know what to look for, currency movements appear random and unpredictable.
The bottom line is a lot of speculation has been rung out of the overvalued peso and a lot of unknown is coming starting Jan. 20. Mexico knows the pressure is on and started with the decision to put the hammer down on the IMMEX program. It’s a beginning but there’s a tough road ahead which I believe will keep the pressure on the peso for the foreseeable future.
As an expat I look forward to the peso weakening to 22 or maybe 23 to the dollar!
Yes, that is beneficial to foreigners who will spend more when the peso is weaker. When the peso was strong my peso rent went up 20% on an already overpriced house.
It’s not about opinions. It’s not about Trump. It’s about the US dollar… nothing more… nothing less