USD/MXN forecasts change all the time, affected by news events and relative sentiment towards the US and Mexican economies and this exchange rate is even more volatile than usual because of the uncertainties around the Coranavirus pandemic and the increase US interest rates.
When uncertainty increases, traders tend to move quickly out of emerging market FX such as the peso first before looking for safe havens.
That said, the peso has recovered into the new year strengthening from the nearly 22 levels of November back towards a range around 20.5 to the green back.
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In September the peso had gained in value back below the important psychological level of 20 against the greenback.
In early June the Mexican peso had extended gains to below 19.7 vs the USD after election result were seen as less conducive to President Andres Manuel Lopez Obrador’s agenda bout constitutional changes impacting the energy sector and independent entities.
Still since the end of September 2020, the Mexican peso has gained around 10% against the dollar. The peso had also delivered the No.1 carry trade — the gains made by borrowing dollars and buying short-term peso-denominated securities — a reward for investors with the stomach to go in after a precipitous 18% selloff in the first half of 2020.
In 2021 the market’s expectation for a rise in US inflation and thus interest rates pushed up the USD exchange rate against most currencies.
This trend is seemingly continuing into 2022 although with a slight hiccup for the greenback mid January with Mr Powell’s confirmation hearing testimony disappointing the markets about the imminence of rate hikes.
The foreign exchange market convention for USD/MXN is to quote Mexican peso as Peso per US dollar. Thus a higher USD/MXN rate actually means one peso is worth less, that is you can buy more peso for 1 USD.
You can read about other USD exchange rate forecasts here US Dollar Trends and Forecasts for 2021.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.