By José Roberto Balmori*
Since February of this year, the Mexican peso has shown a trend of strengthening, going from quoting above 21 pesos per dollar to be located below 18.78 towards the end of June. This behavior is mainly explained by two factors: the differential of interest rates between the Bank of Mexico (Banxico) and the Federal Reserve of the United States (Fed), and the weakening of the US dollar index. Next, both factors are analyzed, as well as some trends that could modify this dynamic in the short term.
The main engine behind the appreciation of weight has been the differential attraction of interest rates between Mexico and the United States. Although Banxico has begun to cut its objective rate, it is still maintained at a high level of 8.00%, higher than other emerging economies such as South Africa (7.25%), India (5.50%), Indonesia (5.50%) or Chile (5%). In contrast, the Fed maintains its interest rate in a range of between 4.25% and 4.50%. This differential has encouraged strategies such as carry-tradein which investors take loans in countries with low rates such as the United States or Europe, to invest in debt instruments in countries with higher rates, such as Mexico. The entry of these speculative capitals strengthens Mexican weight by increasing demand for assets called in this currency.
A second factor that has contributed to the appreciation of the peso is the weakness of the American dollar index, which measures the value of the dollar against a basket of foreign currencies, including the Mexican weight. During the first semester of 2025, this index registered its worst performance since 1973, with a 10.8%drop. This weakening can be favorable for the United States efforts to relocate manufacturing industries, since it makes imports more expensive and lowers exports. However, it can also discourage international trips of Americans, by more expensive costs abroad.
Now, the weight strengthening trend could be reversed if any of the aforementioned factors loses strength. For example, if Banxico continues to cut its interest rate, the differential with respect to the Fed would be reduced, reducing the attractiveness for foreign investors. In addition, US stock market indices are reaching historical maximums, which could indicate that some investors are simply covering in the short term and could soon return to assets called dollars.
Therefore, it is likely that the Mexican weight begins to stabilize at these new levels, instead of continuing its appreciation streak. In fact, when analyzing its behavior against the euro, it is observed that the weight has depreciated in that same period (-2.66%), which indicates that its strength has been specific against the dollar, and not generalized compared to other currencies. Finally, the next TMEC negotiations could have a decisive impact on the price price against the dollar. It will be necessary to be attentive and, without a doubt, not to throw the bells on the flight because foreign capitals could move quickly.
About the author:
*DR. José Roberto Balmori, director of the Bachelor’s Programs at the Faculty of Economics and Business of the Universidad Anáhuac Mexico.
Twitter: @jrbalmori
The opinions expressed are only the responsibility of their authors and are completely independent of the position and the editorial line of Forbes Mexico.
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