The Mexican peso strengthened significantly against the U.S. dollar, achieving its most favorable exchange rate in nearly a year by breaking below the 19 pesos per dollar mark, trading at 18.92 by mid-afternoon in Mexico City.
This appreciation comes amid speculation that the United States might exempt Mexican steel and aluminum from the recently doubled 50% tariff imposed by President Donald Trump. This potential trade relief is significant for travelers and businesses operating between the two countries.
Financial analysts identify multiple factors driving the peso’s strength. Among these are:
- Expectations that the U.S. Federal Reserve might cut interest rates.
- A possible pause by Mexico’s central bank in its own rate reduction cycle.
- Optimism surrounding the recent trade agreement between the United States and China, creating a more favorable global trade environment.
The substantial gap between Mexico’s 8.50% interest rate and the U.S. Federal Reserve’s 4.25%-4.5% range is benefiting the Mexican currency. The peso reached as strong as 18.82 to the dollar earlier in the day, levels not seen since August 2023.
Financial institutions have mixed forecasts regarding the peso’s future performance. Some analysts believe the currency could strengthen further to 18.50 per dollar if global market conditions remain favorable and U.S. tariffs on Mexican products are removed. Conversely, Banamex projects the peso will weaken to 20.6 by December, citing potential tensions from the upcoming USMCA trade agreement review.
For travelers planning trips to Mexico, the stronger peso might mean slightly higher costs. However, the currency remains historically favorable for foreign visitors compared to pre-pandemic levels.
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