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Mexican peso weakens as USD/MXN tops 18.00 for first time in months
USD/MXN was quoted around 18.04, after Mexico and US rate differentials narrowed to about 2.5% and US Treasury yields stayed above 5%.
The Mexican peso extended its slide versus the US dollar for a second straight day, falling 0.29% as USD/MXN moved above the psychological 18.00 level, trading around 18.04 at the time of writing, according to FXStreet.
FXStreet attributed the pressure on the peso to a smaller interest rate spread between Mexico and major economies, along with US Treasury yields that remained above 5%, a mix that encouraged capital repatriation. An analyst cited by Reuters characterized the move as a correction and a reduction in long peso positions rather than a lasting structural shift.
FXStreet said Mexico’s benchmark policy rate is near 6.50% under the central bank, Banxico, while the Federal Reserve has been hiking into a 3.75% to 4% range and is poised for at least another increase to 4% to 4.25%. With the spread narrowing to 2.50%, the piece added that yields on US Treasuries in the 5.23% to 5.61% range made holding USD more attractive than taking Mexico’s local-currency yields amid exchange rate risk.