😎 Summer Sale Exclusive - Up to 50% off AI-powered stock picks by InvestingProCLAIM SALE

Mexico's mighty peso hits 7-year record high against U.S. dollar

Published 05/15/2023, 05:52 PM
Updated 05/15/2023, 06:01 PM
© Reuters

By Noe Torres

MEXICO CITY (Reuters) - Mexico's peso currency flexed its muscle on Monday to reach its highest value against the U.S. dollar in seven years, following nearly two years of interest rate hikes aimed at taming inflation that has seen consumer prices edge down.

Some analysts chalk up the peso's latest gains, however, as mostly the flip side of a weakening greenback.

The peso gained 0.95% on Monday to trade at 17.42 pesos per dollar, its strongest level since May 2016.

Over the last few years, the Mexican currency has mostly hovered around 20 pesos per dollar, but over the past year it holds the distinction of the currency that has gained the most against the U.S. dollar, or up nearly 11%.

President Andres Manuel Lopez Obrador repeatedly touts the peso's strength as evidence of sound macroeconomic policies, especially his administration's budget austerity and pledge to avoid taking on new debt.

But Franklin Templeton portfolio manager Luis Gonzali cited other factors as being behind the peso's latest surge, including the sliding value of the greenback, most recently on fears of a potential default if U.S. lawmakers do not raise the country's debt limit in order to cover already-approved spending.

"A big part of (the peso's strength) is the dollar's weakness," he said, adding that the Mexican economy further benefits from growing flows of fixed investments into the country.

But Mexico City-based Gonzali also acknowledged Mexico's healthier finances, relative to other emerging markets where currencies have not benefited as much as the peso due in part to more public expenditures, higher debt or looser monetary policies.

© Reuters. FILE PHOTO: Mexican peso banknotes are pictured at a currency exchange shop in Ciudad Juarez, Mexico November 10, 2017. Picture taken November 10, 2017. REUTERS/Jose Luis Gonzalez

"Mexico has shown itself to be the least ugly person at the party," quipped Gonzali, helping it attract more dance partners.

On Thursday, the Bank of Mexico is seen maintaining its benchmark interest rate at 11.25%, halting a cycle of hikes that began in June 2021, according to a Reuters poll of analysts.



Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.