Mexican peso strongest against US dollar since 2015. Here's why.
USD/MXN nears new lows under 17.000
Mexican interest rates 5% higher than US rates
The Bank of Mexico's aggressive rate hikes from 4% in 2021 to 11% in 2023, compared to the US Federal Reserve's increase from 0% to 5.5% during the same period, have widened the interest rate differential between Mexico and the US. This significant rate difference plays a key role in influencing the USD/MXN exchange rate, making Mexican assets more attractive to yield-seeking investors and supporting the peso's strength.
Mexico profiting from US growth with 'nearshoring'
As US businesses shift manufacturing from China to Mexico to capitalize on closer geographic proximity and reduced logistics costs - a trend known as 'nearshoring', Mexico's economy benefits from increased manufacturing capacity and job creation. This movement is bolstered by US GDP growth, further supporting the peso's performance as the country leverages economic expansions north of its border.
Peso gains on strong US employment
Strong employment data in the US, partly fueled by Mexican migrant labor, has had a ripple effect on Mexico's economy, as it is the world's second-highest receiver of remittances. This means a percentage of earned US dollars are being sent back to relatives in Mexico, creating natural buyers of the Mexican peso. This trend plays a crucial role in bolstering the Mexican economy, reflecting the interconnectedness of the neighboring economies.
Where is USD/MXN going?
With historical fluctuations ranging from as low as 13.0000 to as high as 24.0000 in the past decade, the USD/MXN pair's future movements remain a point of speculation for traders. Market participants will closely watch for economic indicators, policy changes, and global trade dynamics that could influence the direction of this currency pair, keeping an eye on both short-term fluctuations and longer-term trends.
How to trade USD/MXN
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD/MXN
Trading forex requires an account with a forex broker like tastyfx. USD/MXN can be found in the 'Exotic' pairs tab. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
This information has been prepared by tastyfx, a trading name of tastyfx LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. tastyfx accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.
