The USD to MXN exchange rate has recently shown notable fluctuations influenced by broader economic factors and diverging monetary policies between the U.S. and Mexico. As of early December 2025, the exchange rate was hovering around 17.98, marking a decline of 2.1% from its three-month average of 18.37, and reaching 90-day lows. Analysts suggest that the USD is under downward pressure due to expectations surrounding aggressive Federal Reserve rate cuts, anticipated as early as March to June 2026. This dovish sentiment is attributed to mixed economic indicators from the U.S., where manufacturing growth appears to be slowing while the labor market remains resilient.
On the Mexican side, the peso is expected to trade within a stable range against the dollar, around 16.00 to 22.00, with economists predicting a slight depreciation to 18.92 through 2026. The Banco de México has adopted a more accommodative monetary policy, cutting interest rates to 7.75%, which narrowed the interest rate differential with the U.S. The outlook for MXN is also supported by significant foreign direct investment driven by nearshoring trends among U.S. companies and concerns regarding trade relations, specifically the tariffs imposed on Mexican exports which may weigh on the peso's competitiveness.
The current market sentiment indicates that risk-on behavior among investors, improved global FX conditions, and outlooks for strong foreign investment may reinforce the peso's position. However, challenges remain due to U.S. trade tariffs and macroeconomic dynamics, suggesting the USD to MXN may experience continued volatility within the forecasted range. As such, both businesses and individual investors engaging in international transactions may want to consider these ongoing developments in their currency conversion strategies.
