Forecasts for USD to MXN
Based on recent forecasts and currency market updates, FX analysts predict a reversal in the strength of the US dollar against the Mexican peso in the coming years. This expectation is largely driven by expectations that the Federal Reserve's interest rate hike cycle, which has supported the dollar's strength, will come to an end in 2023. These interest rate hikes have made the dollar more attractive to investors, but as they taper off, the dollar's strength is anticipated to wane.
Furthermore, the performance of the Mexican peso is closely tied to the oil market, as Mexico is a major oil exporter. The recent surge in oil prices has been favorable for the peso. Additionally, cash remittances from Mexican workers in the United States, which have defied predictions of a significant drop due to the pandemic, can also positively impact the value of the peso. These remittances stimulate domestic demand and contribute to economic growth, leading to a stronger Mexican economy and currency.
It is worth noting that the peso experienced a significant plunge in March, falling below the key level of 20 pesos per US dollar. This drop was attributed to increased uncertainty, causing traders to move out of emerging market currencies like the peso and seek safe-haven assets instead. However, the peso has shown stability within a range of 16.68 to 17.67 pesos per US dollar in recent months.
In summary, economists expect the US dollar's strength to reverse in 2023 as the Fed's interest rate hikes come to an end. The Mexican peso's fortunes are linked to the oil market and cash remittances from Mexican workers in the US, both of which have been favorable for the peso. Traders tend to move out of emerging market currencies like the peso during periods of increased uncertainty. The current USD to MXN exchange rate of 17.54 is slightly above its 3-month average, indicating some ongoing strength in the US dollar against the peso.
