Influence of the Stronger US Dollar
The Mexican Peso is currently under pressure and is depreciating against the US Dollar. This development is primarily driven by a positive economic outlook for the USA, which strengthens the dollar.
Capital Flows into the US Dollar
A stronger outlook for the USA leads investors to direct more capital into the US Dollar to benefit from better growth prospects and higher interest rates. This increases demand for the US Dollar while simultaneously weakening currencies like the Mexican Peso.
Interest Rate Spread between the USA and Mexico
An important factor is the interest rate spread between the two countries. Higher interest rates in the USA compared to Mexico make investments in US Dollars more attractive, which further boosts demand for the dollar.
Regional and Technical Factors
Regionally, pessimistic growth forecasts for Latin America further burden the Peso. On a technical level, the USD/MXN pair is moving near important support levels, which, if breached, could signal further weakness.
Further Observations
Interestingly, the Mexican Peso shows an increase against the Cuban Peso in Cuba’s black market. This is an indicator of regional exchange rate movements.
Despite some weak economic data from Mexico, the Peso remains relatively stable; however, short-term losses are possible with ongoing pressure on the local economy.
In summary, the depreciation of the Mexican Peso is mainly supported by a strengthening of the US Dollar due to positive economic developments in the USA.