The Mexican peso traded at below 18 to the US dollar on Monday morning, its strongest position since July 2024.

After ending last week at just above 18 to the dollar, the peso appreciated slightly to reach 17.97 on Monday morning.

At 4:30 p.m. Mexico City time, the USD:MXN exchange rate was 17.99, according to Bloomberg.

The last time the peso traded at below 18 to the dollar was on July 23, 2024.

The peso has appreciated around 16% this year, after closing 2024 at 20.88 to the dollar, according to the Bank of Mexico.

Among the factors that have contributed to the significant appreciation of the peso in 2025 are the weakness of the US dollar, the Bank of Mexico’s still-high benchmark interest rate — even though it has declined by 275 basis points so far in 2025 — and strong foreign investment inflows.

The appreciation has occurred despite ongoing trade tensions with the United States, which in 2025 has imposed tariffs on a range of imports from Mexico, including steel, aluminum and light and heavy vehicles.

Analysts from the Monex financial group attributed the appreciation of the peso on Monday to the “continued decline” of the greenback.

The value of the US dollar fell on Monday morning on the DXY index, which measures the greenback against a basket of foreign currencies, including the euro, the Japanese yen and the British pound.

Monex analysts also said that the peso benefited from the “resolution of tensions between Mexico and the United States thanks to the agreement that puts an end to a water dispute.”

The Mexican and U.S. governments announced on Friday that they had reached “an understanding on water management for the current cycle and the previous cycle’s water deficit under the 1944 Water Treaty.”

As part of the agreement, Mexico committed to begin transferring this week more than 200,000 acre-feet of water to the United States.

On Monday of last week, U.S. President Donald Trump threatened to impose an additional 5% tariff on imports from Mexico if the Mexican government didn’t immediately release a portion of the water it owes to the United States after failing to meet its treaty obligations in the 2020-25 cycle.

The appreciation of the peso on Monday morning comes ahead of the final monetary policy meeting of the Bank of Mexico (Banxico) board, which will convene this Thursday.

The Banxico board has cut its benchmark interest rate after each of its last 11 monetary policy meetings, including all seven held so far this year, and is widely expected to make a 12th successive cut this week. The key rate is currently set at 7.25%.

The United States Federal Reserve cut its key borrowing rate by 25 basis points last week, setting it at a 3.5%-3.75% range.

With reports from El Financiero and El Economista