This story was updated at 3:30 p.m. to reflect a more recent USD:MXN exchange rate.
The Mexican peso depreciated to above 18 to the US dollar on Tuesday afternoon, sliding to its weakest level since late April.
One greenback was trading at 18.07 pesos at 3:30 p.m. Mexico City time, according to Bloomberg. The last time the US dollar was stronger against the peso was April 26.
The USD:MXN exchange rate was 17.67 at the close of markets on Monday, meaning that the peso lost over 2% of its value against the greenback on Tuesday.
Gabriela Siller, director of economic analysis at Mexican bank Banco Base, said on X that the dollar strengthened and the peso weakened after the publication on Tuesday morning of “positive” data on job vacancies in the United States.
The U.S. Labor Department reported Tuesday that there were 9.61 million job openings in August, up from 8.9 million in July. The figure was significantly higher than a 8.8 million consensus forecast of economists, according to financial data company Refinitiv.
Analysts with Mexican bank CI bank predicted before the release of the data that a U.S. job openings figure that exceeded expectations “would intensify” losses for the peso.
Investors “balked at the fresh numbers,” according to a New York Times report. The Times said that investors were “fearful that [the numbers] would signal to the Fed that the economy was still running too quickly, necessitating even higher interest rates to slow it.”
A rise in interest rates in the United States would likely cause the US dollar to strengthen against the peso as it would narrow the gap between the U.S. Federal Reserve’s federal funds rate and the Bank of Mexico’s key rate.
Currently set at a record high of 11.25%, the Bank of Mexico’s key rate is well above the Fed’s 5.25-5.5% range. Analysts cite the broad gap between the two rates as one factor that has helped the peso appreciate this year after it started the year at about 19.5 to the greenback.
The newspaper El Financiero reported that the dollar got a boost after Cleveland Federal Reserve President Loretta Mester said Tuesday that she was open to increasing rates again.
“If the economy looks the way it did at the next meeting, similar to the way it looked at our recent meeting, I would do the further rate increase,” she told reporters on a conference call.
The Fed’s next monetary policy meeting will be held on Nov. 1. Mester is not currently a member of the committee that sets interest rates in the United States.
Another factor that caused the peso to lose ground against the dollar was the increase in long-term U.S. treasury yields, El Economista reported. The 10-year and 30-year Treasury yields reached their highest level since 2007 on Tuesday.
The Financial Times reported that the 30-year yield reached 4.91% for the first time in 16 years “as markets adjusted to the prospect of a long period of high interest rates and governments’ vast borrowing needs.”
“… Expectations that U.S. interest rates will remain higher have boosted the dollar, heaping pressure on other currencies,” the newspaper said.
The USD:MXN exchange rate has fluctuated significantly in recent weeks. The peso traded just above 17 to the dollar in mid September after dipping to 17.6 earlier in the month.
In the past week, the peso has lost about 60 centavos against the greenback, a depreciation of over 3%.
With reports from El Economista, El Financiero and Forbes México
