Mexican Peso Gains Ground Due to Weak Dollar

The local currency benefited from a weakening dollar that occurred following weaker-than-expected May retail sales data in the United States.

The Mexican peso trimmed part of its significant depreciation in 2024 this Tuesday. The local currency benefited from a weakening dollar after the release of weaker-than-expected May retail sales data in the United States.

The exchange rate ended the session at 18.4107 pesos per dollar. Compared to a close of 18.5447 pesos yesterday, according to official data from the Bank of Mexico (Banxico), this movement represented a recovery of 13.40 cents or 0.72 percent.

The dollar’s price moved within a broad range with a high of 18.5589 pesos and a low of 18.2925 pesos. The Dollar Index (DXY) from the Intercontinental Exchange, which measures the greenback against a basket of six currencies, fell 0.05% to 105.27 points.

U.S. retail sales increased by 0.1% month-over-month in May, below the 0.3% expected. This data supports the hopes of those who believe that the Federal Reserve (Fed) should cut interest rates soon this year.

The peso partially recovered after the release of U.S. retail sales figures. The peso stabilizes around 18.40, awaiting policy definitions and the government transition.

On the other hand, despite the recovery, volatility in the exchange rate persists due to concerns over a criticized judicial reform, which is considered by the markets to potentially weaken one of the key checks on executive power.

“Markets are reducing their nervous sentiment towards the incoming government, and the peso was boosted by a retreat in the Dollar Index after weak U.S. May retail sales data,” explained Monex in a report.

Last week, the dollar price reached a high of nearly 19 pesos, a level not seen in 15 months. Although it has gradually regained ground, with a close of 16.9666 in 2023, it still accumulates a decline of 1.44 pesos or 8.5 percent.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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