Mexican Peso Strengthens on Dollar Weakness and Local Unemployment Data
The Mexican peso appreciated against the U.S. dollar on Tuesday, supported by a weaker dollar and positive local unemployment figures.
Investors are closely watching U.S. labor market data and remarks from Federal Reserve officials for further clues on monetary policy.
The spot exchange rate stood at 20.3507 pesos per dollar, reflecting a 0.21% gain from Monday’s official close of 20.3926 pesos, according to the Bank of Mexico (Banxico). The peso recovered 4.19 cents, moving within a range of 20.3212 to 20.4331 pesos per dollar. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.27% to 106.16 points.
Investors are awaiting the release of the U.S. Job Openings and Labor Turnover Survey (JOLTS) report, alongside comments from various Federal Reserve officials scheduled throughout the day.
The Federal Reserve and the Mexican Peso
The peso’s appreciation aligns with speculation that the Federal Reserve may cut interest rates during its December 18 meeting. Fed Governor Christopher Waller expressed support for a rate cut on Monday, while New York Fed President John Williams suggested further reductions were likely. Futures markets, tracked by CME Group’s FedWatch tool, indicate a 73% probability of a rate cut, potentially lowering the target range to 4.25%-4.50% with three reductions anticipated.
Local Data
Earlier, Mexico’s National Institute of Statistics and Geography (INEGI) reported an October unemployment rate of 2.5% (seasonally adjusted). The unadjusted rate also stood at 2.5%. This positive reading bolstered the peso and provided Banxico with flexibility to keep its benchmark rate unchanged during its December 19 meeting if needed.
The peso continues to benefit from a combination of a softer dollar and favorable domestic economic indicators.
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