Mexican Peso Hits 6-Week High

The Mexican peso strengthened to around 17.27 per U.S. dollar, its highest level since late February. The appreciation was driven by broad dollar weakness and increased risk appetite, supported by optimism over diplomatic progress between the US and Iran. Despite global uncertainty, Mexico continues to attract interest, underpinned by relatively high interest rates and robust manufacturing data. Monetary policy remains a key driver, with the benchmark rate at 6.75%, comfortably exceeding the 4.59% inflation rate. Meanwhile, February exports rose 15.8% to $56.85 billion, fueled by a surge in mining and manufactured goods. This resilience is further reinforced by auto exports climbing 4.2% year-over-year in March (310,205 units)

The Mexican peso strengthened 0.3% on Friday, trading around 17.31 as markets focused on geopolitical developments, including US–Iran negotiations. Uncertainty in the Middle East, particularly risks around the Strait of Hormuz, continues to support a geopolitical risk premium. The US dollar remains under pressure as US inflation stays broadly in line with expectations and the Federal Reserve maintains a cautious, data-dependent stance, limiting Treasury yield upside. At the same time, resilient but uneven US growth keeps markets balanced between inflation and slowdown risks. Risk appetite supports emerging market currencies, with the peso benefiting from strong carry appeal and a wide interest rate differential versus the US. USD/MXN is down 14.79% this year, reflecting dollar weakness and sustained inflows into Mexican assets.

The Mexican peso has soared toward the 17.4 per US dollar mark, reaching an over 1-month high as a global shift away from safe havens followed President Trump’s decision to delay infrastructure strikes by two weeks. Risk appetite has surged following the plunge in oil prices which mitigates the threat of an energy-driven inflation shock for the Mexican economy. Despite this external relief, Banco de México remains in a complex position after its Governing Board recently lowered the target interest rate by 25 basis points to 6.75% in a surprise 3-2 split decision. While core inflation has remained relatively stable near 4.46% the latest Banxico survey shows that private sector analysts have revised 2026 headline inflation expectations upward to 4.21%. Markets are now pricing in a potential final rate cut to 6.5% later this year as policymakers balance upside inflation risks against a domestic manufacturing sector that has faced persistent contraction.