Mexican Peso Ends Flat Against the Dollar, Posts 1.91% Weekly Gain
The Federal Reserve cut interest rates by 25 basis points in each of its last three meetings, but analysts have begun to anticipate a pause.
Quick overview
- The Mexican peso closed virtually unchanged against the U.S. dollar after a strong appreciation the previous day.
- The exchange rate ended the week at 17.6465 pesos per dollar, reflecting a marginal loss of 0.02%.
- Despite expectations for a pause in Federal Reserve rate cuts, the peso appreciated by 1.91% over the week.
- Market participants are closely monitoring economic data and remarks from Federal Reserve officials.
The local currency edged slightly lower after appreciating yesterday to levels not seen in a year and a half, but still closed the week with a strong positive move.
The Mexican peso finished Friday’s session virtually unchanged against the U.S. dollar. After strengthening the previous day to its strongest level in 18 months, the currency gave back marginal ground but ended the week with solid gains.
The exchange rate closed at 17.6465 pesos per dollar. Compared with Thursday’s close of 17.6499, according to official data from Banco de México (Banxico), this represented a marginal loss of 0.02%, less than one cent.
During the session, the dollar traded within a range of a high of 17.7323 pesos and a low of 17.6284. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.01% to 99.36 points. The exchange rate stabilized with a slightly bullish bias despite a weaker dollar, reflecting reduced expectations for cuts to the Federal Reserve’s target range for the federal funds rate.
Fed pause expected
According to the FedWatch tool, which tracks federal funds futures, traders expect the Fed’s key interest rate to remain in the 3.50%–3.75% range following its first policy meeting of the year on January 28.
The Federal Reserve cut interest rates by 25 basis points in each of its last three meetings, but analysts have begun to anticipate a pause amid persistent inflationary pressures and signs of stability in the labor market.
Earlier, the U.S. central bank reported that manufacturing activity unexpectedly increased in December, supported by a rise in primary metals production that offset declines in motor vehicle plants.
In addition to economic data, markets closely followed public remarks from Federal Reserve officials, including Susan Collins, president of the Boston Fed; Fed Governor Michelle Bowman; and Vice Chair Philip Jefferson.
Strong weekly performance
Despite fading expectations for Fed rate cuts, the peso continued to appreciate. Compared with last week’s close of 17.9836 pesos per dollar, the move represents a gain of 33.77 cents, or 1.91%, over the week.
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