Mexican Peso Pulls Back After 17-Month High
The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, rose 0.17% to 98.39 points.
Quick overview
- The Mexican peso weakened against the U.S. dollar, closing at 18.0154 pesos per dollar amid uncertainty over the Federal Reserve's interest rate outlook.
- This decline followed a recent positive streak for the peso, which had reached its strongest level since July 2024.
- Investors are anticipating Banxico's monetary policy decision, with expectations of a 25-basis-point rate cut to 7%.
- The currency pair is trading with low volume and limited conviction, contributing to notable liquidity gaps.
The peso slipped as the U.S. dollar rebounded, amid uncertainty over the future path of the Fed’s key rate and one day ahead of Mexico’s local monetary policy decision.
The Mexican peso weakened against the dollar in Wednesday’s session. The local currency pulled back as the greenback regained strength, with markets weighing uncertainty around the Federal Reserve’s interest rate outlook and ahead of Thursday’s domestic policy announcement.
Mexican Peso – U.S. Dollar Outlook
The exchange rate closed at 18.0154 pesos per dollar. Compared with Tuesday’s close of 17.9509, according to official data from the Bank of Mexico (Banxico), the move represented a loss of 6.45 cents, or 0.26%.
The dollar traded within a range between a high of 18.0499 and a low of 17.9572 pesos. The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, rose 0.17% to 98.39 points.
The peso retreated after its recent positive streak and a weaker dollar pushed it on Tuesday to its strongest level since July 2024 (a 17-month high). Wednesday’s decline came alongside a renewed strengthening of the dollar, as markets focused on signals from the Fed.
Earlier in the day, Fed Governor Christopher Waller said there was still room for interest rate cuts due to concerns about a softening labor market, following three consecutive adjustments. While a divided Fed cut rates last week, it also signaled that further reductions are unlikely in the near term. Markets are now awaiting remarks from New York Fed President John Williams and Atlanta Fed President Raphael Bostic.
Data of Mexico
On the local front, investors are looking ahead to Banxico’s final monetary policy decision of the year on Thursday. Analysts expect the central bank to deliver a twelfth consecutive 25-basis-point rate cut, which would bring the benchmark rate down to 7%.
Meanwhile, the currency pair continues to trade with low volume and limited conviction, hovering around the 18-peso level, which has held as initial resistance. Thin interest and small flows are contributing to notable liquidity gaps.
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