Mexican Peso Hits 12-month Low

The Mexican peso weakened to around 18.78 per US dollar in October, its weakest level since October 2025, as expectations of a narrowing US-Mexico interest rate differential, geopolitical uncertainty and stalled USMCA negotiations weighed on sentiment. Expectations of further easing by the Bank of Mexico, alongside the Federal Reserve's September rate hike, have reduced the peso's yield advantage and encouraged investors to unwind carry trades. Meanwhile, uncertainty surrounding the Middle East conflict has dampened risk appetite, while limited progress in the US-Mexico-Canada Agreement review has clouded the trade outlook. Investors are now awaiting Mexico's first-half October inflation data for further clues on the Bank of Mexico's monetary policy outlook. Headline inflation is expected to accelerate to 3.60% year-on-year from 3.42%, while biweekly inflation is forecast to rise to 0.37% from 0.33%.

The Mexican Peso touched 18.77 against the USD, the lowest since October 2025. Over the past 4 weeks, US Dollar Mexican Peso gained 7.07%, and in the last 12 months, it increased 1.99%.

The Mexican peso weakened to around 18.47 per US dollar in October, testing the lowest in 11 months, as the narrowing interest-rate differential between Mexico and the US reduced the pes’s appeal. In the US, annual producer price inflation reached 6.3%, while consumer price inflation rose to 3.7%, reinforcing expectations that the Federal Reserve will hike rates this year. Meanwhile, minutes from Banxico’s latest monetary policy meeting showed that most members of the Governing Board believe moderating core inflation and weak domestic consumption provide room to continue easing monetary policy into late 2026 and early 2027. Expectations of a narrower interest-rate differential have boosted demand for the dollar by reducing the expected inflow of capital into Mexico as Mexican yields become less attractive to foreign investors. On the other hand, expectations of record exports in 2026, driven by artificial intelligence and industrial relocation, are providing some support for the peso.