Mexican Peso Falls Against the Dollar After Local Inflation Data

The Mexican peso depreciated slightly against the U.S. dollar in Monday’s trading, following the release of inflation data that reinforced expectations of significant rate cuts by Mexico’s central bank (Banxico) in upcoming meetings.

The exchange rate closed at 20.4272 pesos per dollar, down from 20.4131 on Friday, according to official Banxico data. This represents a loss of 1.41 centavos (0.07%).

Throughout the session, the dollar fluctuated between a high of 20.5252 and a low of 20.3477 pesos. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.07% to 106.68 points.

Inflation and Interest Rates

Mexico’s consumer price index recorded an annual increase of 3.74% in the first half of February. Despite the uptick, inflation remains within Banxico’s target range of 3% ±1%. Core inflation stood at 3.61%.

At its early February meeting, Banxico accelerated its rate cuts, lowering the benchmark interest rate by 50 basis points, after five consecutive 25-basis-point reductions from a record high of 11.25%. The central bank signaled that further cuts could be considered.

Beyond the impact of rate cuts on demand for Mexican bonds, the inflation data follows confirmation that the country’s economy contracted in Q4 2024, marking its worst year since the pandemic.

U.S. Tariffs Loom

Traders are also bracing for potential volatility as the March 4 deadline approaches for the United States to decide on 25% tariffs on imports from Mexico and Canada, which had been temporarily suspended for 30 days.

This is the last full week before the deadline, and any updates on the possible enforcement of these tariffs could heighten exchange rate fluctuations.

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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