What are USD to MXN forecasts?
According to recent market updates, the USD to MXN exchange rate has been trading in a volatile range, and currently stands at 1.4% below its 3-month average. The value of the MXN is linked to the oil market and US interest rates as Mexico holds large levels of dollar-denominated debt, which becomes harder to repay when US rates go up. However, the Mexican economy has been resilient in the face of the pandemic, with strong cash remittances from immigrant workers in the US helping to stimulate domestic demand and contribute to economic growth.
Looking ahead, FX analysts expect the US dollar to continue to firm up as increasing Sino-American tensions boost the safe-haven currency's appeal. However, the PMIs from S&P Global could dampen USD demand if they reveal weaker services readings and factory activities to stall. Economists have also warned that the US dollar's strength over the past year is expected to reverse in 2023 as the Fed's interest rate hikes cycle ends. Therefore, with a potential weakening of the USD in the future, it could lead to an appreciation of the MXN. However, as uncertainty increases, traders tend to move quickly out of emerging market currencies such as the MXN first before looking for safe havens.